Advanced Excel® PC Workshop - Yield Curve Construction and Term Structure Modelling
Dates:
February 19 - 20, 2009
February 19 - 20, 2009
Location:
Prague, Mövenpick Hotel
Prague, Mövenpick Hotel
Price:
EUR 1,500
EUR 1,500
Lecturer:
Søren Braes
Søren Braes
- Bootstrapping and Curve Fitting
- Yield Curve Estimation Techniques
- Pricing with Convexity Adjustment
- Term Structure Modelling
- Equilibrium and No-Arbitrage Models
- Pricing Interest Rate Options
- Analyzing Instruments with Embedded Options
The purpose of this workshop is to give you a good understanding of and hands-on experience with advanced financial modelling and simulation techniques in Excel and Visual Basic for Applications.
We start with an introduction to the VBA environment and demonstrate how sub-routines and user functions can be programmed, tested and implemented. The participants will then program a pricing function in VBA that will be used in conjunction with the Excel Solver to “bootstrap” and smooth swap and bond curves using the “cubic splining” technique.
Further, we shall program and implement a stochastic term structure model (BDT) using the “forward induction” technique. The model is calibrated to match the observed term structure and observed volatilities.
We work with Excel to extract sub-trees from the base-tree and show how these sub-trees can be converted back into forward zero coupon curves using reverse forward induction.
We address how the BDT-tree can be extended to have stochastic volatility and some calibration issues relating hereto.
Finally we program pricing routines for interest options together with the risk assessment routines to calculate the “greeks”. We also use the tree representation to value highly complex option structures being path-dependent.
We start with an introduction to the VBA environment and demonstrate how sub-routines and user functions can be programmed, tested and implemented. The participants will then program a pricing function in VBA that will be used in conjunction with the Excel Solver to “bootstrap” and smooth swap and bond curves using the “cubic splining” technique.
Further, we shall program and implement a stochastic term structure model (BDT) using the “forward induction” technique. The model is calibrated to match the observed term structure and observed volatilities.
We work with Excel to extract sub-trees from the base-tree and show how these sub-trees can be converted back into forward zero coupon curves using reverse forward induction.
We address how the BDT-tree can be extended to have stochastic volatility and some calibration issues relating hereto.
Finally we program pricing routines for interest options together with the risk assessment routines to calculate the “greeks”. We also use the tree representation to value highly complex option structures being path-dependent.
Participants are requested to bring their own laptop equipped with Excel 2003. The lecturing will be done using Excel 2003 since Excel 2007 is too slow for many applications. If you can't bring your own laptop, please make a clear note in the registration form.
Microsoft®, Excel®, Visual Basic® and VBA® are registered trade marks of MICROSOFT Corporation.
09.15 - 12.00 Bootstrapping and Curve Fitting
- Yield Curves, Par Curves and Zero Coupon Curves
- “Bootstrapping” the Curve
- Convexity-Adjusted Deposit Futures
- FRAs
- Par Swap Rates
- Smoothing and Fitting Techniques
- Nelson-Siegel
- Cubic Splining
- Using the Fitted Curve to Price Bonds, Swaps etc.
- Computer Workshop (Excel/VB):
Participants Program and Test Yield Curve Estimation Routines in Excel/VB
12.00 - 13.00 Lunch
13.00 - 16.30 Term Structure Modelling
- Introduction to Interest Rate Models
- Equilibrium Models (quick overview)
- Rendleman and Barter
- Vasicek
- Cox, Ingersoll, & Ross (CIR)
- No-arbitrage Models
- The BDT Model
- Forward Induction
- Computer Workshop (Excel/VB):
Participants Program and Test the BDT Model
Friday, February 20
09.00 - 09.15 Recap
09.15 - 12.00 Term Structure Modelling (continued)
- No-arbitrage Models (continued)
- The Hull-White Model (quick overview)
- The Libor Market (BGM) Model (quick overview)
- A General Tree-Building Procedure
- Extracting sub-trees and calculating forward curves using reverse forward Induction
- Computer Workshop (Excel/VB):
Participants extract forward curves from the BDT Tree
12.00 - 13.00 Lunch
13.00 - 15.45 Pricing Interest Rate Options (continued)
- Pricing Caps, Floors and Swaptions
- Using Analytical Approaches
- Using Numerical Approaches
- Risk Analysis
- Estimating Delta, Gamma, Vega etc. for Interest Rate Options
- Pricing Constant Maturity Swaps
- Analyzing Instruments with Embedded Options
- Callable and Putable Bonds
- Cancellation Swaps
- Extendable swaps
- Computer Workshop:
Participants Analyse Selected IRO Structures Using the BDT Model
Evaluation and Termination of the Workshop
