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I'm trying to price an interest rate swap and would like to change the default coupon payment frequency from 1 a year to 2 or 4 a year. I'm using

Price = swapbyzero(RateSpec, LegRate, i, Maturity, 'Principal', Principal); 

and tried

Price = swapbyzero(RateSpec, LegRate, i, Maturity, 'Principal', Principal,'Period',2); 

where 'Period' is a valid option when pricing bond using

prbyzero

I'm using matlab 2013a

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2 Answers 2

I don't know what is supported by MatLab (I use Java to do such stuff :-).

But in case you do not find a solution from the swapbyzero function you mentioned I can suggest a workaround:

  • Value a swap with the annual fix frequence.

Given that it is a payer swap (pays the fixed leg), correct the value by:

  • Substract the value of an annual fix coupon bond and
  • Add the value of the desired frequence fix coupon bond.

PS: Note that the MatLab function is likely not appropriate to value a swap in a "realistic" way, since it looks like multi-curve (OIS discounting) is not considered here (I wonder if term structure is considered?), see also Rationale for OIS discounting for collateralized derivatives?

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up vote 0 down vote accepted

Name-Value pair option 'LegReset' [n n] where n is the frequency

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Is this the answer? –  chrisaycock May 27 '13 at 15:07
1  
Question was also asked on Stack Overflow, and this was the answer accepted. stackoverflow.com/questions/16764495/… –  Phil H May 31 '13 at 13:28

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