Description

Derivative Pricing for Interest Rate Derivatives
under Heath-Jarrow-Morton (HJM) Framework
for Term Structure of Interest Rates
with
Principal Components Analysis (PCA),
Monte Carlo Simulation (MCS),
Credit Valuation Adjustment (CVA)

Package comes with:

• Excel Workbook (.xlsm) Implementation
  • With Sample Historical Forward Rates Term Structure from Bank of England
  • With Differentiated Forward Rates
  • With Covariance Matrix and Plot of Differentiated Forward Rates
  • With Principal Component Analysis (PCA) of the Covariance Matrix
    • VBA Function to Extract Eigen-Vectors
    • VBA Function to Extract Eigen-Values
    • 1-Click to Sort Results by Eigen-Values
    • Volatility Response of Top 3 Factors (Level, Slope, Curvature)
    • Volatility Term Structure for Top 3 Factors
  • Volatility Fitting
    • Factor 1 = Level = Constant
    • Factor 2 = Slope = Polynomial, 1-Click Regression
    • Factor 3 = Curvature = Polynomial, 1-Click Regression
  • Monte Carlo Simulation (MCS) with Credit Valuation Adjustment (CVA)
    • Simulate 1 time
    • Simulate n times
    • Calculate Average of n Simulations
    • Get Simulated Prices for
      • Zero-Coupon Bond
      • Caplet
      • Floorlet
      • Forward Rate Agreement (FRA)
      • Cap
      • Floor
      • Payer Swap
      • Receiver Swap
    • Select the derivative (from above list) for CVA adjustment
      • Price before adjustment
      • CVA adjustment
      • Price after CVA-adjustment
  • All VBA modules
    • are NOT password protected
    • are fully exposed for your modification
    • well commented

• Basic User Guide
  • Basic instructions on how to use the Excel Workbook Implementation
  • In Word (.docx) format
  • In PDF (.pdf) format

• Mathematical Theory and Code Guide
  • Full explanation of the model with mathematical formulas and derivations
  • Full explanation of code
  • In Word (.docx) format
  • In PDF (.pdf) format

Works on:

• Windows PC (with an internet connection and access to finance.yahoo.com)
• Microsoft Excel 2016, 2013, 2010, 2007

Please contact us if you have requests to customize the spreadsheet.