Portfolio Creation Using Functions

Introduction

The instadd function creates a set of instruments (portfolio) or adds instruments to an existing instrument collection. The TypeString argument specifies the type of the investment instrument. For interest-rate-based derivatives, the types are: Bond, OptBond, CashFlow, Fixed, Float, Cap, Floor, and Swap. For equity derivatives, the types are Asian, Barrier, Compound, Lookback, and OptStock.

The input arguments following TypeString are specific to the type of investment instrument. Thus, the TypeString argument determines how the remainder of the input arguments is interpreted. For example, instadd with the type character vector for Bond creates a portfolio of bond instruments.

InstSet = instadd('Bond', CouponRate, Settle, Maturity, Period,
Basis, EndMonthRule, IssueDate, FirstCouponDate, LastCouponDate,
StartDate, Face)

Interest-Rate-Based Derivatives

In addition to the bond instrument already described, the toolbox can create portfolios containing the following set of functions for interest-rate-based derivatives:

Bond option

InstSet = instadd('OptBond', BondIndex, OptSpec, Strike, ExerciseDates, AmericanOpt)

Arbitrary cash flow instrument

InstSet = instadd('CashFlow', CFlowAmounts, CFlowDates, Settle, Basis)

Fixed-rate note instrument

InstSet = instadd('Fixed', CouponRate, Settle, Maturity, FixedReset, Basis, Principal)

Floating-rate note instrument

InstSet = instadd('Float', Spread, Settle, Maturity, FloatReset, Basis, Principal)

Cap instrument

InstSet = instadd('Cap', Strike, Settle, Maturity, CapReset, Basis, Principal)

Convertible bond instrument

InstSet = instcbond(CouponRate,Settle,Maturity,ConvRatio)

Floor instrument

InstSet = instadd('Floor', Strike, Settle, Maturity, FloorReset, Basis, Principal)

Swap instrument

InstSet = instadd('Swap', LegRate, Settle, Maturity, LegReset, Basis, Principal, LegType)

Swaption instrument

InstSet = instadd('Swaption', OptSpec, Strike, ExerciseDates, Spread, ...
Settle, Maturity, AmericanOpt, SwapReset, Basis, Principal)

Bond with embedded option instrument

InstSet = instadd('OptEmBond', CouponRate, Settle, Maturity, OptSpec, Strike, ...
ExerciseDates, 'AmericanOpt', AmericanOpt, 'Period', Period,'Basis', Basis, ...
'EndMonthRule', EndMonthRule,'Face',Face,'IssueDate', IssueDate, 'FirstCouponDate', ...
FirstCouponDate, 'LastCouponDate', LastCouponDate,'StartDate', StartDate)

Equity Derivatives

The toolbox can create portfolios containing the following set of functions for equity derivatives:

Asian instrument

InstSet = instadd('Asian', OptSpec, Strike, Settle, ExerciseDates, AmericanOpt, ...
AvgType, AvgPrice, AvgDate)

Barrier instrument

InstSet = instadd('Barrier', OptSpec, Strike, Settle, ExerciseDates, AmericanOpt, ...
BarrierType, Barrier, Rebate)

Compound instrument

InstSet = instadd('Compound', UOptSpec, UStrike, USettle, UExerciseDates, UAmericanOpt, ...
COptSpec, CStrike, CSettle, CExerciseDates, CAmericanOpt)

Convertible bond instrument

InstSet = instcbond(CouponRate,Settle,Maturity,ConvRatio)

Lookback instrument

InstSet = instadd('Lookback', OptSpec, Strike, Settle, ExerciseDates, AmericanOpt)

Stock option instrument

InstSet = instadd('OptStock', OptSpec, Strike, Settle, Maturity, AmericanOpt)