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Price Interest-Rate Instruments

Create interest-rate instrument object, associate the object with a model, and specify pricing method

An interest-rate instrument is a derivative with a value that is linked to the movement of interest rates. This toolbox provides functionality to price, compute sensitivity, and perform hedging analysis for many interest-rate securities. You can price bonds, floating-rate notes, vanilla swaps, futures, bond options, amortizing bonds, caps, and floors with pricing models that include lattice models, Monte Carlo simulations, and multiple closed-form solutions.

The object-based framework supports a workflow for creating instruments, models, and pricer objects to price financial instruments. Using these objects, you can price interest-rate, inflation, equity, commodity, FX, or credit derivative instruments. The object-based workflow is an alternative to pricing financial instruments using functions. Working with modular objects for instruments, models, and pricers, you can easily reuse these objects to compare instrument prices for different models and pricing engines. You can use the object-based workflow to price a single instrument or to price a collection of instruments in a portfolio. For more information on the workflow, seeGet Started with Workflows Using Object-Based Framework for Pricing Financial Instruments.

Create an interest-rate instrument with or without optionality.

  • To create an interest-rate instrument object without optionality, usefininstrument, associate aratecurveobject usingratecurve, and then specify a pricing method usingfinpricer.

  • To create an interest-rate instrument object with optionality, usefininstrument, associate aratecurveobject usingratecurveand a model object usingfinmodel, and then specify a pricing method usingfinpricer.

Functions

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fininstrument Create specified instrument object type
finmodel Create specified model object type
finpricer Create pricing method
setPutExercisePolicy Set put exercise policy forOptionEmbeddedFixedBond,OptionEmbeddedFloatBond, orConvertibleBondinstrument
setCallExercisePolicy Set call exercise policy forOptionEmbeddedFixedBond,OptionEmbeddedFloatBond, orConvertibleBondinstrument
setExercisePolicy Set exercise policy forFixedBondOption,FloatBondOption, orVanillainstrument
price Compute price for interest-rate, equity, or credit derivative instrument withAnalyticpricer
price Compute price for interest-rate instrument withDiscountpricer
price Compute price for interest-rate instrument withIRTreepricer
price Compute price for interest-rate instrument withIRMonteCarlopricer
cashflows Compute cash flow forFixedBond,FloatBond,Swap,FRA,STIRFuture,OISFuture,OvernightIndexedSwap, orDepositinstrument
parswaprate Compute par swap rate forSwapinstrument
volatilities 计算隐含波动率在使用SABRpricer

Objects

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ratecurve Createratecurveobject for interest-rate curve from dates and data
Deposit Depositinstrument object
FixedBond FixedBondinstrument object
FixedBondOption FixedBondOptioninstrument object
FloatBond FloatBondinstrument object
FloatBondOption FloatBondOptioninstrument object
OptionEmbeddedFixedBond OptionEmbeddedFixedBondinstrument object
OptionEmbeddedFloatBond OptionEmbeddedFloatBondinstrument object
ConvertibleBond ConvertibleBondinstrument object
Cap Capinstrument object
Floor Floorinstrument object
Swap Swapinstrument object
Swaption Swaptioninstrument object
FRA FRAinstrument object
OvernightIndexedSwap OvernightIndexedSwapinstrument object
STIRFuture STIRFutureinstrument object
OISFuture OISFutureinstrument object
HullWhite CreateHullWhitemodel object forCap,Floor,Swaption,Swap,FixedBond,FloatBond,FloatBondOption,FixedBondOption,OptionEmbeddedFixedBond, orOptionEmbeddedFloatBondinstrument
BlackKarasinski CreateBlackKarasinskimodel object for aCap,FloorSwaption,Swap,FloatBond,FixedBond,FixedBondOption,FloatBondOption,OptionEmbeddedFixedBond, orOptionEmbeddedFloatBondinstrument
Black CreateBlackmodel object forCap,Floor, orSwaptioninstrument
Normal CreateNormalmodel object forCap,Floor, orSwaptioninstrument
SABR CreateSABRmodel object forSwaptioninstrument
SABRBraceGatarekMusiela CreateSABRBraceGatarekMusielamodel object forCap,Floor,FixedBond,FloatBond,FloatBondOption,FixedBondOption,OptionEmbeddedFixedBond, orOptionEmbeddedFloatBondinstrument
BraceGatarekMusiela CreateBraceGatarekMusielamodel object forCap,Floor,FixedBond,FloatBond,FloatBondOption,FixedBondOption,OptionEmbeddedFixedBond, orOptionEmbeddedFloatBondinstrument
LinearGaussian2F CreateLinearGaussian2Fmodel object forCap,Floor,Swaption,Swap,FixedBond,FloatBond,FloatBondOption,FixedBondOption,OptionEmbeddedFixedBond, orOptionEmbeddedFloatBondinstrument
Discount CreateDiscountpricer object forDeposit,FRA,Swap,FixedBond,FloatBond,OISFuture,STIRFuture, andOvernightIndexedSwapusingratecurveobject
IRTree CreateIRTreepricer object forCap,Floor,Swap,Swaption,FloatBond,FixedBond,FixedBondOption,FloatBondOption,OptionEmbeddedFixedBond, orOptionEmbeddedFloatBondinstrument
IRMonteCarlo CreateIRMonteCarlopricer object for equity instruments usingHullWhite,BraceGatarekMusiela, orLinearGaussian2Fmodel
Normal CreateNormalpricer object forCap,Floor, orSwaptioninstrument usingNormalmodel
SABR CreateSABRpricer object forSwaptioninstrument usingSABRmodel
Black CreateBlackpricer object forCap,Floor, orSwaptioninstrument usingBlackmodel
HullWhite CreateHullWhitepricer object forCap,Floor, orSwaptioninstrument usingHullWhitemodel

Examples and How To

Calibrate Shifted SABR Model Parameters for Swaption Instrument

This example shows how to calibrate the shiftedSABRmodel parameters for aSwaptioninstrument when you use aSABRpricing method.

Calibrate SABR Model Using Normal (Bachelier) Volatilities with Analytic Pricer

This example shows how to use two different methods to calibrate the SABR stochastic volatility model from market implied Normal (Bachelier) volatilities with negative strikes.

Calibrate SABR Model Using Analytic Pricer

This example shows how to use two different methods to calibrate a SABR stochastic volatility model from market implied Black volatilities.

价格使用SABR互换期权模型和分析Pricer

This example shows how to price a swaption using theSABRmodel.

Concepts

Get Started with Workflows Using Object-Based Framework for Pricing Financial Instruments

Use objects to model and price financial instruments.

Choose Instruments, Models, and Pricers

Select instruments, associated models, and associated pricers.

Work with Negative Interest Rates Using Objects

Financial Instruments Toolbox™ computes prices for caps, floors, swaptions when modeling for negative interest-rates using the object framework.

Mapping Financial Instruments Toolbox Functions to Object-Based Framework for Instruments, Models, and Pricers

Mapping functions to a workflow using objects for instruments, models, and pricers.

Supported Exercise Styles

The following table lists the interest-rate instrument objects with their associated models and pricers and supportedExercisestyles.

Related Information

Featured Examples

Calibrate SABR Model Using Normal (Bachelier) Volatilities with Analytic Pricer

Calibrate SABR Model Using Normal (Bachelier) Volatilities with Analytic Pricer

Use two different methods to calibrate the SABR stochastic volatility model from market implied Normal (Bachelier) volatilities with negative strikes. Both approaches use the SABR analytic pricer. When the Beta parameter of the SABR model is set to zero, the model is a Normal SABR model, which allows computing the implied Normal volatilities for negative strikes.
Open Live Script
Calibrate SABR Model Using Analytic Pricer

Calibrate SABR Model Using Analytic Pricer

Use two different methods to calibrate a SABR stochastic volatility model from market implied Black volatilities. Both approaches use the SABR analytic pricer.
Open Live Script
价格使用SABR互换期权模型和分析Pricer

价格使用SABR互换期权模型和分析Pricer

Price a swaption using the SABR model. First, you construct a swaption volatility surface from market volatilities by calibrating the SABR model parameters separately for each swaption maturity using the SABR analytic pricer. You then compute the swaption price by using the implied Black volatility on the surface with the SABR analytic pricer.
Open Live Script
Calibrate Shifted SABR Model Parameters for Swaption Instrument

Calibrate Shifted SABR Model Parameters for Swaption Instrument

Calibrate the shifted SABR model parameters for a Swaption instrument when you use a SABR pricing method.
Open Live Script
Compute LIBOR Fallback

Compute LIBOR Fallback

Compute a USD LIBOR fallback. Regulators and industry groups have recommended that firms transition away from the London inter-bank offered rate (LIBOR) and prepare to replace them with overnight Alternative Reference Rates (ARRs). What happens to contracts with a notional value of trillions of dollars if they refer to a benchmark that no longer exists? If the LIBOR benchmark is no longer published, references to that benchmark rate must change and benchmark rates “fall back” to a new benchmark in contracts. For example, if a 30-year floating-rate instrument with a three-month coupon based on the LIBOR rate is created in 2008 and expires in 2038, then the rate will need to change in 2023 because in 2023, the publication of a LIBOR rate permanently ceases. To calculate three-month coupon payments after 2023, you must use a LIBOR fallback. This example is based on the ISDA® 2020 IBOR Fallbacks Protocol.
Open Live Script
Create and Price Portfolio of Instruments

Create and Price Portfolio of Instruments

Use finportfolio and pricePorfolio to create and price a portfolio of interest-rate and equity instruments. The portfolio contains a vanilla FixedBond, an OptionEmbeddedFixedBond, a Vanilla European call option, a Vanilla American call option, and an Asian call option.
Open Live Script

Financial Instruments Toolbox Documentation

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A Practical Guide to Modeling Financial Risk with MATLAB

A Practical Guide to Modeling Financial Risk with MATLAB

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