| Financial Derivatives Toolbox | |
Syntax
Arguments
Tree |
Tree can be a Black-Derman-Toy (BDTTree) or Heath-Jarrow-Morton (HJMTree) interest rate tree or a money market tree (MMktTree). See bdttree for information on creating BDTTree. See hjmtree for information on creating HJMTree. The functions mmktbybdt and mmktbyhjm create money market trees. |
PriceTree |
PriceTree is a Black-Derman-Toy (BDTPriceTree) or Heath-Jarrow-Morton (HJMPriceTree) tree of instrument prices. |
CFTree |
CFTree is a BDT (BDTCFTree) or HJM (HJMCFTree) tree of swap cash flows. You create cash flow trees when executing the functions swapbybdt and swapbyhjm. |
InstSet |
(Optional) Variable containing a collection of instruments whose prices or cash-flows are contained in a tree. The collection can be created with the function instadd or as a cell array containing the names of the instruments. To display the names of the instruments, the field Name should exist in InstSet. If InstSet is not passed, treeviewer uses default instruments names (numbers) when displaying prices or cash flows. |
Description
treeviewer(Tree)
displays an interest rate or money market tree.
treeviewer(PriceTree, InstSet)
displays a tree of instrument prices. If you provide the name of an instrument set (InstSet) and you have named the instruments using the field Name, the treeviewer display identifies the instrument being displayed with its name. (See Example 3 below for a description.) If you do not provide the optional InstSet argument, the instruments are identified by their sequence number in the instrument set. (See Example 6 below for a description.)
treeviewer(CFTree, InstSet)
displays a cash flow tree that has been created with swapbybdt or swapbyhjm. If you provide the name of an instrument set (InstSet) containing cash flow names, the treeviewer display identifies the instrument being displayed with its name. (See Example 3 below for a description.) If the optional InstSet argument is not present, the instruments are identified by their sequence number in the instrument set. See Example 6 below for a description.)
treeviewer price tree diagrams follow the convention that increasing prices appear on the upper branch of a tree and, consequently, decreasing prices appear on the lower branch. Conversely, for interest rate displays, decreasing interest rates appear on the upper branch (prices are rising) and increasing interest rates on the lower branch (prices are falling).
treeviewer provides an interactive display of prices or interest rates. The display is activated by clicking on the nodes along the price or interest rate path shown in the left panel when the function is called. For HJM trees you select the end points of the path, and treeviewer displays all data from beginning to end. With BDT trees you must click on each node in succession from the beginning (t = 1) to the last node (t = n). Do not include the root node, the node at t = 0. If you do not click on the nodes in the proper order, you are reminded with the message:
Example 1.
Display an HJM interest rate tree.
The treeviewer function displays the structure of an HJM tree in the left panel. The tree visualization in the right panel is blank.
To visualize the actual interest rate tree, go to the Tree Visualization panel and click on Path (the default) and Diagram. Now, select the first path by clicking on the last node (t = 3) of the upper branch.
Note that the entire upper path is highlighted in red.
To complete the process, select a second path by clicking on the last node (t = 3) of another branch. The second path is highlighted in purple. The final display looks like
Alternative Forms of Display
The Tree Visualization panel allows you to select alternative ways to display tree data. For example, if you select Path and Table as your visualization choices, the final display above instead appears in tabular form.
To see a plot of interest rates along the chosen branches, choose Path and Plot in the Tree Visualization panel.
Note that with Plot selected rising interest rates are shown on the upper branch and declining interest rates on the lower.
Finally, if you choose Node and Children under Tree Visualization, you restrict the data displayed to just the selected parent node and its children.
With Node and Children selected, the choices under Visualization are unavailable.
Example 2.
Display a BDT interest rate tree.
The treeviewer function displays the structure of a BDT tree in the left panel. The tree visualization in the right panel is blank.
To visualize the actual interest rate tree, go to the Tree Visualization panel and click on Path (the default) and Diagram. Now, select the first path by clicking on the first node of the up branch (t = 1). Continue by clicking on the down branch at the next node (t = 2). The two figures below show the treeviewer path diagrams for these selections.
Continue clicking on all nodes in succession until you reach the end of the branch. Note that the entire path you have selected is highlighted in red.
Select a second path by clicking on the first node of the lower branch (t = 1). Continue clicking on lower nodes as you did on the first branch. Note that the second branch is highlighted in purple. The final display looks like
Example 3.
Display an HJM price tree for named instruments.
load deriv.mat [Price, PriceTree] = hjmprice(HJMTree, HJMInstSet); treeviewer(PriceTree, HJMInstSet)
Example 4.
Display a BDT price tree for named instruments.
load deriv.mat [Price, PriceTree] = bdtprice(BDTTree, BDTInstSet); treeviewer(PriceTree, BDTInstSet)
Example 5.
Display an HJM price tree with renamed instruments.
load deriv.mat [Price, PriceTree] = hjmprice(HJMTree, HJMInstSet); Names = {'Bond1', 'Bond2', 'Option', 'Fixed','Float', 'Cap',... 'Floor', 'Swap'}; treeviewer(PriceTree, Names)
Example 6.
Display an HJM price tree using default instrument names (numbers).
See Also
bdttree, hjmtree, instadd, mmktbybdt, mmktbyhjm, swapbybdt, swapbyhjm
| | treeshape | Glossary | |
