| Level-coupon European & American Bond Options (HW-Tree) | |
Level-coupon European & American Bond Options (HW-Tree)HWTree_BondAmerCall(argument list…)
HWTree_BondAmerPut(argument list…)
HWTree_BondEuroCall(argument list…)
HWTree_BondEuroPut(argument list…)
These functions return the values of American and European call and put options on coupon-bearing bonds using the Hull-White trinomial tree interest rate model. The functions use the following arguments:
| Argument | Description | Restrictions |
| Valuation_Date | valuation date (e.g. today) | valid Excel date number |
| Bond_Settlement_Lag | number of business days until settlement for bond transaction made on Valuation_Date | >= 0 |
| Bond_Maturity_Date | bond maturity date | > Valuation_Date (with settlement lag) |
| Coupon | annual bond coupon in decimal form (e.g. six percent entered as 0.06) | >= 0 |
| 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) |
| Option_Maturity | option expiry date | valid Excel date number >= Valuation_Date <= Bond_Maturity_Date |
| Strike | option strike per $100 par | > 0 |
| 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 corresponding to Zero_Dates | > 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 |
| OAS | parallel shift of the zero curve in decimal form | |
| Bucket_Start | start 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 |
| Tree_Steps | number of steps in trinomial tree | > 0, typically 25-50 |
| Holidays | array of holiday dates | valid Excel date numbers strictly ascending order |
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