The Chicago Mercantile Exchange (CME) clears European swaption trades on 3-month USD LIBOR since April 2016 and has thus become the first major exchange that lists Over-The-Counter (OTC) interest rate products with optionality. The standardized swaption contracts have 5 different expiries - 1M, 3M, 6M, 1Y, 2Y – and 7 underlying swap tenors - 1Y, 2Y...
Both the Nelson Siegel method and its Svensson extension are very popular among central and other banks when the time spectrum of interest rates needs to be derived from market bond prices. If you are interested in non-parametric methods favored by relative value traders as they provide an exact fit to observed bond prices, these have been demonstr...
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 ...
Most people are unaware of the fact that free and open source QuantLib comes with a great variety of modelling approaches when it comes to pricing an interest rate European swaption in Excel that surpasses what is offered by expensive commercial products. In fact, 14 different modelling approaches are implemented, whereby the Black approach does no...
Free and open source QuantLib supports the precise valuation of Credit Default Swaps (CDS) in Excel. Table Of Contents CDS Description Creating a slimmed-down CDS object in 13 secondsCreating a full-fledged CDS objectUnderstanding the main formulaBrowsing the contents of a created CDS objectUsing the CDS objectThe Price functionAdditio...
Free and open source QuantLib is capable of calculating several risk measures associated with the pricing of bonds and allows you to get in Excel quantities like clean and dirty price, duration, convexity, BPS, DO01, Z-spread etc. I have already showed you how to build a yield curve out of clean bond prices using either a parametric or no...
Building, pricing and analyzing even non-standard interest rate swaps in Excel becomes a simple exercise when the Deriscope interface to the open source QuantLib analytics library is employed. We have already encountered a simple interest rate swap contract in the Yield Curve Building in Excel using Swap Rates article, where vanilla swaps were used...
With this article I want to give you an intuitive feeling of the concept of interest rate and also show you how to work with various types of interest rates – such as a compounded interest rate - in Excel as accurately as market professionals do. Table Of Contents The Primitives: Time and Money How did our prehistoric ancestors measure...
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...
With this article I want to show you how to create a yield curve in Excel by bootstrapping bond prices, using the open source QuantLib analytics library. I will present both alternative spreadsheet interfaces to QuantLib, which are the QuantLibXL and Deriscope. For a production-ready setup using actual Bloomberg quotes of US Treasuries, look at Boo...
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...
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 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 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 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 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 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 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...
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...
In my Introduction to Deriscope – Part 2 I showed you how to create a Stock Option object in Excel and how to access the list of functions that apply to that object. Now I will show you how to use the most important of these functions, the Price, which calculates the fair price of the calling object. Alternatively, you may watch my YouTub...
