Re: Newby Question

Posted by Sutcliffe, Anthony on
URL: http://quantlib.414.s1.nabble.com/Newby-Question-tp7349p7351.html

Thanks Animesh.

 

Forgive me for being a little dense (I can't help it), but I'm not quite sure I follow.

 

I can see the term structure and swap example in the example sheet, and I hope I'll be able to manufacture a more complex term structure using a different function (there's a good example of this in the other example sheet). But I'm not sure how modelling the term structure a number of times will reveal the probability of different term structures occurring. Am I missing something obvious?

 

I was expecting to use qlHullWhite, or something similar to model the evolution of the term structure up to some future date, and then revalue the swap on that future date.

 

Alternatively, I wondered if there was a function that allowed the calcuation of the probability of exercise for a swaption, that way I could set up a swaption with an exercise price equal to the one I'm interested in.

 

Have I completely missed the point?

 

Anthony Sutcliffe
Assistant Vice President
Investment Risk Management

State Street Global Advisors Limited
20 Churchill Place, London E14 5HJ

[phone] (Direct Line)

 

 

---

From: animesh saxena [mailto:[hidden email]]
Sent: 02 August 2010 10:10
To: Sutcliffe, Anthony
Cc: [hidden email]
Subject: Re: [Quantlib-users] Newby Question

There is a sample given in StandaloneExamples/InterestRateDerivatives.xls file.

Although I am assuming you already have used that file. So regarding calculation of probability I think one of the ways is to model different term-structures, and find the swap values. Calculating the probability then is just a simple division!
In the sheets "Swaps" (Swap value is calculated using the rates in term structures sheet) and "TermStructures", this has been done.
It's been done for a flat forward rate, so a simple solution might be to use a nice macro to change it, and calculate swap values. For more complex term structures you can change this qlFlatForward function and use a different term structure.

Hope this helps.


On 8/2/10 1:00 PM, Sutcliffe, Anthony wrote:

Hello all.

I'm trying to do the following:

To calculate the probability of the value of a swap falling below a given level using the quantlib xl addin. The choice of interest rate model is not that important, as this is just proof of concept, although a term-structure matching version is preferred. I'd also like to be able to display the envelope in which the yield curve will move at a given confidence interval.

I've downloaded the addin and it appears to work, but I'm not sure how to proceed from here. Can anyone give me any pointers?

Thanks very much.

Anthony Sutcliffe
Assistant Vice President
Investment Risk Management
State Street Global Advisors Limited
20 Churchill Place, London E14 5HJ
[phone] (Direct Line)

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