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cvtree

Convert inverse-discount tree to interest-rate tree

Description

example

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

Examples

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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: [1x1 struct]
    TimeSpec: [1x1 struct]
    RateSpec: [1x1 struct]
        tObs: [0 1 2 3]
        dObs: [731947 732313 732678 733043]
      CFlowT: {[4x1 double]  [3x1 double]  [2x1 double]  [4]}
       Probs: {[3x1 double]  [3x3 double]  [3x5 double]}
     Connect: {[2]  [2 3 4]  [2 2 3 4 4]}
     FwdTree: {[1.0279]  [1.0528 1.0356 1.0186]  [1x5 double]  [1x5 double]}

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)

Figure Tree Viewer contains 2 axes and other objects of type uicontrol. Axes 1 contains 41 objects of type line. Axes 2 is empty.

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

RTree = cvtree(HWTree)
RTree = struct with fields:
      FinObj: 'HWRateTree'
     VolSpec: [1x1 struct]
    TimeSpec: [1x1 struct]
    RateSpec: [1x1 struct]
        tObs: [0 1 2 3]
        dObs: [731947 732313 732678 733043]
      CFlowT: {[4x1 double]  [3x1 double]  [2x1 double]  [4]}
       Probs: {[3x1 double]  [3x3 double]  [3x5 double]}
     Connect: {[2]  [2 3 4]  [2 2 3 4 4]}
    RateTree: {[0.0275]  [0.0514 0.0349 0.0185]  [1x5 double]  [1x5 double]}

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)

Figure Tree Viewer contains 2 axes and other objects of type uicontrol. Axes 1 contains 41 objects of type line. Axes 2 is empty.

Input Arguments

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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

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

Introduced before R2006a