Financial Instruments Toolbox

Interest-Rate Instruments

Financial Instruments Toolbox includes functions for finding prices and sensitivities of several fixed-income instruments based on interest-rate curves. You can price interest-rate instruments using closed-form solutions, interest-rate term structure, or trees. You can apply the functions to a portfolio of different types of instruments or to groups of instruments of the same type.

The toolbox provides tools to calculate price, par fixed-rate, and duration of interest-rate swaps. The duration-hedging capabilities let you hedge a portfolio and address interest-rate risk with a swap arrangement. Supported swaps include vanilla, forward, and amortizing.

  • For bond futures, you can calculate price, bond conversion factors, and implied repo rate. You can then use this information to manage interest-rate risk for your portfolio.
  • For convertible bonds, you can calculate price using binomial and trinomial trees. The value of the convertible bond is determined by the uncertainty of the relative stock.
Plots showing convertible bond floor when the share prices are low, and price as a function of share price and years to maturity.
Plots showing convertible bond floor when the share prices are low (left), and price as a function of share price and years to maturity (right).

You can also calculate price using Black's model for forwards, futures, options on futures, swaptions, European call/put options, interest-rate cap/caplets, and interest-rate floor or floorlets.

Additional fixed-income instruments include:

  • Zero-coupon bonds, for calculating price and yield to extract the present value from any fixed coupon instrument for any time period
  • Treasury bills, for calculating price, yield, discount rate, and breakeven discount rate
  • Corporate, treasury, and municipal bonds, for calculating price, yield, and cash-flow schedules
  • Stepped-coupon bonds, for calculating price, yield, and cash-flow schedules
  • Agency option-adjusted spread (OAS), for calculating price and spread for callable bonds
  • Range, fixed-rate, floating-rate, and collared floating-rate notes, for calculating price and accrued interest
  • Vanilla and exotic options, for calculating implied volatility, price, and sensitivity
Plot of an agency option adjusted spread.
Plot of an agency option adjusted spread for a noncallable bond issue and a Z-spread for a callable bond issue for a range of bond prices.
Next: Equity Instruments

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