In my previous article I showed how one can use Deriscope in Excel to calculate through Monte Carlo simulation the price of a European style equity linked note that paid once at maturity an amount linked to the minimum of two equity indices observed at that time. With the current article I start a series of posts that address the valuation of ...
Structured products occupy a distinctive space in modern capital markets, sitting at the intersection of derivatives engineering, quantitative finance, and investment product design. Unlike standard financial instruments such as vanilla options, swaps, or bonds—which are typically defined by relatively simple payoff formulas and well-establish...
Setting up an interest rate swaption trading desk is a complex endeavor. First, the type of the underlying interest rate should be defined, and it can be either a still existing ibor rate such as EURIBOR or JPY TIBOR or – in the case of LIBOR that has been discontinued as of June 30, 2023 - an equivalent ARR (Alternative Reference Rate) s...
Asian options come in different flavors as described below, but to the extent they have European exercise rights they can be priced by QuantLib using primarily Monte Carlo, but under certain circumstances using also Finite Differences or even analytic formulas. Table Of Contents Asian Option Description Creating all four types of Asian ...
The topic here is not about simple option pricing but rather about dealing with the complexity introduced by the simultaneous existence of several different currencies in the context of calculating the Price and Value at Risk of a portfolio of European FX options. If you are not familiar with the basics of European option pricing in Excel using Der...
In my previous article I showed how one can use Deriscope in Excel to calculate the price of a particular type of a structured product that pays the minimum of two equity indices observed at some specified future terminal time. As example was used the Trigger Plus note issued by Morgan Stanley on April 1, 2019, which is based on the value of t...
Various structured products can be precisely priced in Excel using Deriscope and its underlying QuantLib analytics. In this article I will focus on the Trigger Plus product issued by Morgan Stanley on April 1, 2019. It is based on the value of the worst performing of the Dow Jones Industrial Average and the Russel 2000 Index due April 4, 2024. It o...
I have covered in quite exhausting detail the mathematical description of an Overnight Index Swap (OIS) in my earlier post about Pricing and Understanding OIS using Excel. Since then, OIS have increased in significance due to the cessation of Libor that affected primarily the USD and GBP currencies to the effect that today hardly anyone still trade...
When it comes to building a yield curve out of bond prices, QuantLib can handle both non-parametric and parametric methods, both deliverable to Excel through Deriscope. The former have been demonstrated at my articles Yield Curve Building in Excel using Bond Prices (QuantLibXL vs Deriscope and Bootstrapping in Excel a Yield Curve to perfectly fit B...
The pricing of exotic interest rate products cannot ignore the so called market volatility cube that is made daily available by several swaption brokers. Traders often use the SABR Stochastic volatility model in order to estimate vols off the provided grid. In this article I will show you how to price an out-of-the-money swaption by applying SABR c...
Deriscope is described by … Wikipedia at https://en.wikipedia.org/wiki/fascinatingnewproducts/bestever/deriscope as a "wizard-guided Excel Add-In dedicated to the pricing of Financial Derivatives". Well, it is a bit early for such a Wikipedia entry given Deriscope's recent birth date of August 2017. But the above description still applies and makes...
In my Introduction to Deriscope – Part 3 I showed you the most basic features of the Deriscope wizard by using it to create the pricing formula of a Stock Option. Now, I show you several advanced Deriscope features that help you build efficient Excel spreadsheets. Table of Contents Deriscope Formula Syntax RulesColor RulesSyntax Rule: On...
With this article I want to show you how to create and price European options on an underlying that pays discrete dividends – such as European stock options - in Excel using the open source QuantLib analytics library. In my previous article I presented an overview of the QuantLib models that can be used in Excel towards pricing the simplest non-lin...
With this article I want to show you how to create and price American options on a non-dividend-paying underlying – such as American stock options - in Excel using the open source QuantLib analytics library. Table Of Contents American Options: What are they?Creating an object of type Stock OptionGenerating the pricing formulasPricing O...
With this article I want to show you how to create and price American options on an underlying that pays dividends – such as American stock options expiring after the ex-dividend date - in Excel using the open source QuantLib analytics library. In my previous article I showed you how to calculate the fair price of an American option on an unde...
With this article I want to show you how to create a yield curve in Excel using the open source QuantLib analytics library, when the input market data are deposit rates – such as Libor rates -, which are a special type of interest rates called zero rates. Table Of Contents Deposit Contract Description What is a Yield Curve?Why do we ne...
With this article I want to show you how to create a yield curve in Excel using the open source QuantLib analytics library, when the input market data are forward rates. My previous article focused on building a yield curve in Excel out of deposit rates in general and Libor rates in particular. These rates cover the short range of the maturity spec...
With this article I want to show you how to create a yield curve in Excel using the open source QuantLib analytics library, when the input market data are futures prices. The futures convexity will be taken into account. I explained how you may build a yield curve in Excel out of forward rates in my previous article. In reality, forward rates are s...
With this article I want to show you how to create a yield curve in Excel using the open source QuantLib analytics library, when the input market data are swap rates. I will also show you how to apply dual bootstrapping when an exogenous yield curve is present. For short term maturities – typically less than a year – the yield curve may be built ou...
With this article I want to show you how to create a yield curve in Excel using the open source QuantLib analytics library, when the input market data are a mixture of deposit rates, futures prices and swap rates. I have already written how you may build a yield curve using a single type of market instruments, such as deposits, futures or swap...
