| HWTree_ExchBondOpt() function | |
HWTree_ExchBondOpt() function
HWTree_ExchBondOpt(argument list…)
This function returns the value of an option to exchange one bond plus cash for another bond. The function uses the following arguments:
| Argument | Description | Restrictions |
| Valuation_Date | valuation date (e.g. today) | valid Excel date number |
| Bond_Freq | bond accrual frequency per annum | 1, 2, 4, or 12 |
| Bond1_Mat | maturity date of the bond one wishes to exchange (give up) | valid Excel date number > Valuation_Date |
| Bond1_Cpn | annual coupon rate of the bond one wishes to give up, in decimal form (e.g. six percent entered as 0.06) | >= 0 |
| Bond1_OAS_diff | the spread above the zero curve for the bond one wishes to give up, IN ADDITION to the regular OAS | |
| Cash | the amount of cash per $100 par one must also exchange in order to receive the other bond | |
| Bond2_Mat | maturity date of the bond one wishes to exchange for (receive) | valid Excel date number > Valuation_Date (must have overlapping coupons with other bond) |
| Bond2_Cpn | annual coupon rate of the bond one wishes to receive, in decimal form | >= 0 |
| Bond2_OAS_diff | the spread above the zero curve for the bond one wishes to receive, IN ADDITION to the regular OAS | |
| First_X_Date | the first exchange opportunity | must be on a coupon date |
| Exer_Freq | the number of exchange opportunities per annum | 1, 2, 4, or 12 <= Bond_Freq |
| Last_X_Date | the final exchange date | must be on a coupon date |
| NoticeDays | minimum notice, in days, required to exchange the bonds | >= 0 |
| Short_Rate_Vol | annual standard deviation of the short rate of interest, in decimal form | > 0 |
| Reversion_Rate | mean reversion rate of the short rate of interest, in decimal form | >= 0 |
| Tree_Step | number of steps in the trinomial tree PER EXERCISE DATE | > 0 (typically 2 to 10) |
| Zero_Dates | array of zero coupon curve dates | strictly ascending order The first date of this array must be Valuation_Date |
| Zero_Rates | array of continuously compounded riskless rates in decimal form (e.g. six percent entered as 0.06) corresponding to Zero_Dates | > 0 |
| OAS | parallel shift of the zero curve in decimal form | |
| Bucket_Start | beginning of bucket for zero curve shifts | set to 0 if curve shift is not desired |
| Bucket_End | end of bucket for zero curve shift | >= Bucket_Start |
| Bucket_Shift | parallel shift of the zero curve between Bucket_Start and Bucket_End in decimal form | set to 0 if curve shock is not desired |
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