cvtree

Convert inverse-discount tree to interest-rate tree

Syntax

RateTree = cvtree(Tree)

Description

RateTree = cvtree(Tree) converts a tree structure using inverse-discount notation to a tree structure using rate notation for forward rates.

Examples

Convert a Hull-White Tree Using Inverse-Discount Notation

Convert a Hull-White tree using inverse-discount notation to a Hull-White tree displaying interest-rate notation.

load deriv.mat;
HWTree

HWTree = struct with fields:
      FinObj: 'HWFwdTree'
     VolSpec: [1×1 struct]
    TimeSpec: [1×1 struct]
    RateSpec: [1×1 struct]
        tObs: [0 1 2 3]
        dObs: [731947 732313 732678 733043]
      CFlowT: {[4×1 double]  [3×1 double]  [2×1 double]  [4]}
       Probs: {[3×1 double]  [3×3 double]  [3×5 double]}
     Connect: {[2]  [2 3 4]  [2 2 3 4 4]}
     FwdTree: {[1.0279]  [1.0528 1.0356 1.0186]  [1.0829 1.0652 1.0478 1.0306 1.0138]  [1.0946 1.0767 1.0591 1.0418 1.0248]}

HWTree.FwdTree{1}

ans = 
1.0279

HWTree.FwdTree{2}

ans = 1×3

    1.0528    1.0356    1.0186

Use treeviewer to display the path of interest rates expressed in inverse-discount notation.

treeviewer(HWTree)

Use cvtree to convert the inverse-discount notation to interest-rate notation.

RTree = cvtree(HWTree)

RTree = struct with fields:
      FinObj: 'HWRateTree'
     VolSpec: [1×1 struct]
    TimeSpec: [1×1 struct]
    RateSpec: [1×1 struct]
        tObs: [0 1 2 3]
        dObs: [731947 732313 732678 733043]
      CFlowT: {[4×1 double]  [3×1 double]  [2×1 double]  [4]}
       Probs: {[3×1 double]  [3×3 double]  [3×5 double]}
     Connect: {[2]  [2 3 4]  [2 2 3 4 4]}
    RateTree: {[0.0275]  [0.0514 0.0349 0.0185]  [0.0796 0.0632 0.0467 0.0302 0.0137]  [0.0904 0.0739 0.0574 0.0409 0.0245]}

RTree.RateTree{1}

ans = 
0.0275

RTree.RateTree{2}

ans = 1×3

    0.0514    0.0349    0.0185

use treeviewer to display the converted tree, showing the path of interest rates expressed as forward rates.

treeviewer(RTree)

Input Arguments

Tree — Tree structure

HJM Tree | BDT Tree | HW Tree | BK Tree | CIR Tree

Tree structure, specified by Heath-Jarrow-Morton, Black-Derman-Toy, Hull-White, Black-Karasinski, or Cox-Ingersoll-Ross tree structure that uses inverse-discount notation for forward rates.

Data Types: struct

Output Arguments

RateTree — Tree structure using rate notation for forward rates

structure

Tree structure using rate notation for forward rates, returned as a tree structure.

Version History

Introduced before R2006a