Interest Rate Functions

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Interest Rate Functions

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FinOptions XL has a comprehensive set of models for pricing, calculating sensitivities, and implied values of a wide array of interest rate instruments. FinOptions XL includes functions for evaluating 5 different types of interest rate derivatives. All functions unless otherwise specified evaluate European style options.



Interest Rate Functions:


The Futures function is used to value a forward or future value of a dividend and non-dividend securities. The function can evaluate securities with a continuous dividend yield and when dividends are paid with discrete amounts. An example of discretely paying securities is a dividend paying stock. An example of a continuous yield security is foreign currency.


The FinOptions XL function Futures can be used to evaluate Futures contracts.




The theoretical price of a bond can be calculated as the present value of the cash flows using the appropriate zero-coupon interest rates as discount rates. The yield on a coupon-bearing bond is the discount rate that equates to term structure’s cash flows to its market value. The duration is a measure of how long the holder of the bond has to wait before receiving cash payments.


The FinOptions XL function Bond can be used to evaluate Bond contracts.



Bond Options

The bond option is an option to buy or sell a particular bond by a certain date for a particular price or strike. Callable and Putable bond contracts are examples of bond options. The bond price is calculated with this function based off of the principal as input and the European bond option is evaluated using the Black 76 function.


The FinOptions XL function BondOptions can be used to evaluate Bond Option contracts.



Cap Floor

An interest rate cap consists of a series of individual European call options or caplets where each caplet is evaluated with a modified version of the Black 76 function using the implied forward rate at each caplet maturity. The price of the cap is the sum of the caplet prices. Likewise, the floor is the sum of the individual put options.


The FinOptions XL function CapFloor can be used to evaluate Cap or Floor Option contracts.




The option to enter into an interest rate swap. In exchange for an option premium, the buyer gains the right but not the obligation to enter into a specified swap agreement with the issuer on a specified future date. The valuation is based off of the Black 76 function.

The FinOptions XL function Swaption can be used to evaluate Swaption contracts.