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Blog-style articles that help you understand derivatives better by pricing them in Excel.

All available articles about Derivatives Pricing in Excel through Deriscope.

Floating Rate Notes (FRN) in Excel: Understanding Duration, Discount Margin and KRD

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Deriscope exports in Excel over 30 functions that deal with bonds, as I have described in an earlier document about bond risk management functions.In spite of the fact that the referred functions apply to all types of bonds, including interest rate and inflation linked bonds, one should be cautious when the referenced bond does not pay a fixed rate...
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Combining Randomized Quasi Monte Carlo (Sobol) and Parallel Processing (Multithreading) when Pricing Derivatives in Excel

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The beauty of Monte Carlo simulation is that it can be used to price any European financial derivative contract, of which the terminal payoff is expressed as a function of D terminal underlying factors by simulating the terminal values of these factors as of the contract's maturity date.It turns out, the successful execution of a Monte Carlo simula...
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464 Hits
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Monte Carlo Pricing of any European Structured Product in Excel: Revisiting the Morgan Stanley Trigger Plus 2024 Note

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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...
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848 Hits
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Perfect Bloomberg Price Match of an Interest Rate Swap in Excel by using Dual Bootstrapping

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Up until the financial crisis of 2008, the price calculation of an interest rate swap involved only the so-called Libor curve. The latter was essentially the discount factors (or equivalently zero rates or forward rates) implied by market-traded instruments, such as deposits, futures, forwards and swaps. The Libor curve was used to derive everythin...
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2939 Hits
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Pricing Structured Products in Excel: The Morgan Stanley Trigger Plus 2024 Note

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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...
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1343 Hits
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Currency Swaps and Basis Curves in Excel

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​The basic concepts of spot fx rates, forward fx contracts, fx swaps and the construction of foreign yield curves out of fx forward rates have been described in detail in my previous fx rates article.While these instruments cover the short end of the maturity spectrum – typically about a year -, the tenor of so-called currency swaps (also know...
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FX Spots, Forwards, Swaps and Curves in Excel

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​Assume you possess Nd units of a currency DOM regarded as domestic currency. For example, you live in the US and hold 1,000 USD, ie. Nd = 1,000 and DOM = USD.For whatever reasons, you want to replace this money with their equivalent number of units Nf of another currency FOR regarded as foreign currency. For concreteness think of FOR like if it we...
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10157 Hits
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Bond Key Rate Duration (KRD) in Excel: Calculating and Understanding

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You are all familiar with the concept of bond Duration, which tells us how much a bond's price changes if its yield goes up or down by a small amount.While there exist several different Duration definitions that produce slightly different results, the one that is most closely related to the Key Rate Duration is the Modified Duration D, which may be...
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4010 Hits
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Risk free Yield Curve Building in Excel using Negative Overnight Index Swap (OIS) Rates

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Long are the dates when all-purpose risk free yield curves were produced out of deposits, futures and swaps. Since the credit crisis of 2007/08, banks realized they should use different curves for different purposes. In the intervening years, quants have proven mathematically that uncollateralized contingent flows should be discounted using a curve...
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1543 Hits
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Overnight Index Swap (OIS): Pricing and Understanding using Excel

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Overnight Index Swaps (OIS) may be priced in Excel using the free and open source derivatives analytics QuantLib library through the Deriscope Excel interface.An OIS contract is very similar to a plain vanilla interest rate swap, the only difference being that each payment in the floating leg is calculated according to a floating number F that equa...
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5713 Hits
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How to compute the VaR: Step-by-Step Excel Guide

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The purpose of this article is to show you step-by-step how you can calculate the Value at Risk (VaR) of any portfolio by generating all simulation samples in the spreadsheet. This is great for understanding what's going on but it becomes too complex and slow when the number of samples generated by the simulation exceeds 100.If you don't ...
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3550 Hits
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Pricing of Risk Scaling Options in Excel

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You are all familiar with simple European call options that are securities promising to pay their holders at some agreed future time T the difference S(T) – K between the price S(T) realized by a monitored underlying S at time T and a fixed amount K, under the condition that S(T) is greater than K. The last long sentence may be compressed to t...
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Market Data in Excel from IEX

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IEX (Investors Exchange) is a new United States national stock exchange launched in New York in September 2016. Since February 2017 IEX publishes free of charge their trading data in real time. These include live and historical prices of over 8,000 US stocks and mutual funds plus financial information and news.Update as of September 2019: Sinc...
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2039 Hits
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Market Data in Excel from TrueFX

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TrueFX is a provider of real time forex rates between the most liquid currencies. Both current prices and bid/offer quotes are streamed as quoted by various brokers. Currently the following 43 currency pairs are supported: Deriscope Initialization Deriscope is an Excel AddIn specializing in derivatives valuation and live feeds acquisition...
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1317 Hits
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Market Data in Excel from Alpha Vantage

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Alpha Vantage is a provider of live and historical prices of global stocks, indices and forex rates (both fiat and crypto) as well as time series of statistical indicators. Live feeds are based on one-minute intraday series. Historical data include daily close, open, high, low and volume quotes and go back at least 20 years. Alpha Vantage prov...
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Market Data in Excel from Barchart

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Barchart is – among else - a provider of live and historical prices of global stocks, indices, mutual funds, futures, options and forex rates (both fiat and crypto). In the free version of their service, live feeds are restricted to less than 25 symbols per query and 400 queries per day whereas the historical data may extend up to the last 6 m...
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1303 Hits
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Market Data in Excel from Yahoo Finance

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Yahoo Finance is a provider of market information that includes live and historical prices of global stocks, indices, mutual funds, futures, options, commodities as well as forex (both fiat and crypto) and US treasury bond rates. Depending on the sourcing exchange, live feeds may be instant or delayed by a few minutes according to this ta...
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7287 Hits
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Market Data in Excel from World Trading Data

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World Trading Data is a provider of live and historical prices of global stocks, indices, US mutual funds and forex rates. Their expanding database currently covers over 58,000 stocks around the world, 25,000 US-based mutual funds and 20,000 fiat currency combinations. Live feeds are generally delayed by a few minutes, as is usual wi...
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2067 Hits
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