HW_CurveBondPriceVarOAS() function

HW_CurveBondPriceVarOAS() function

HW_CurveBondPriceVarOAS(argument list…)

This function is not derived from the Hull-White model per se, but is provided as a utility which is useful when pricing variable bond options with the Hull-White model. It returns the OAS of a bond relative to the zero curve rates given a price and bucket shift. A bond with a higher OAS is relatively "cheap" compared to bonds priced exactly on the zero curve. The function uses the following arguments:

Argument	Description	Restrictions
Valuation_Date	valuation date (e.g. today)	valid Excel date number
Settlement_Date	bond settlement date	valid Excel date number >= Valuation_Date
Maturity_Date	bond maturity date	valid Excel date number >= Settlement_Date
Freq	number of bond coupons per annum	1, 2, 4, or 12
DCB	day count basis	0 = 30/360 (US) 1 = act/act for CAD/US T-Bonds 2 = act/360 3 = act/365 4 = 30/360 (European)
Coupon_Dates	array of bond coupon dates	First element must be the last coupon date before the settlement date, or an even older coupon, and last element must be the maturity date of the bond. Dates must be in ascending order, and consistent with the coupon frequency and maturity date.
Coupon_Rates	array of bond coupon rates, as annualized rates, in decimal form (e.g. six percent entered as 0.06)	>= 0, and corresponding to the Coupon_Dates array
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
Bond_Price	quoted bond price	> 0
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