bdtvolspec

Specify Black-Derman-Toy interest-rate volatility process

Syntax

VolSpec = bdtvolspec(ValuationDate,VolDates,VolCurve)

VolSpec = bdtvolspec(___,InterpMethod)

Description

VolSpec = bdtvolspec(ValuationDate,VolDates,VolCurve) creates a structure specifying the volatility for bdttree.

VolSpec = bdtvolspec(___,InterpMethod) adds the optional argument InterpMethod.

Examples

Create a BDT Volatility Specification

This example shows how to create a BDT volatility specification (VolSpec) using the following data.

ValuationDate = '01-01-2000';
EndDates = [datetime(2001,1,1) ; datetime(2002,1,1) ; datetime(2003,1,1) ; 
datetime(2004,1,1); datetime(2005,1,1)];
Volatility = [.2; .19; .18; .17; .16];

BDTVolSpec = bdtvolspec(ValuationDate, EndDates, Volatility)

BDTVolSpec = struct with fields:
             FinObj: 'BDTVolSpec'
      ValuationDate: 730486
           VolDates: [5×1 double]
           VolCurve: [5×1 double]
    VolInterpMethod: 'linear'

Input Arguments

ValuationDate — Observation date of the investment horizon

character vector date | datetime

Observation date of the investment horizon, specified as a scalar datetime, string, or date character vector.

To support existing code, bdtvolspec also accepts serial date numbers as inputs, but they are not recommended.

VolDates — Number of points of yield volatility end dates

datetime array | string array | date character vector

Number of points of yield volatility end dates, specified as a NPOINTS-by-1 vector using a datetime array, string array, or date character vectors.

To support existing code, bdtvolspec also accepts serial date numbers as inputs, but they are not recommended.

VolCurve — Yield volatility values

decimal

Yield volatility values, specified as a NPOINTS-by-1 vector of decimal values. The term structure of VolCurve is the yield volatility represented by the value of the volatility of the yield from time t = 0 to time t + i, where i is any point within the volatility curve.

Data Types: double

InterpMethod — Interpolation method

'linear' (default) | character vector with values supported by interp1

(Optional) Interpolation method, specified as a character vector with values supported by interp1.

Data Types: char

Output Arguments

VolSpec — Specification for the volatility model for bdttree

structure

Structure specifying the volatility model for bdttree.

Version History

Introduced before R2006a

R2022b: Serial date numbers not recommended

Although bdtvolspec supports serial date numbers, datetime values are recommended instead. The datetime data type provides flexible date and time formats, storage out to nanosecond precision, and properties to account for time zones and daylight saving time.

To convert serial date numbers or text to datetime values, use the datetime function. For example:

t = datetime(738427.656845093,"ConvertFrom","datenum");
y = year(t)

y =

        2021

There are no plans to remove support for serial date number inputs.