swap.commodity: Commodity Swap

In FinancialMath: Financial Mathematics for Actuaries

Description

Solves for the fixed swap price, given the variable prices and interest rates (either as spot rates or zero coupon bond prices).

Usage

swap.commodity(prices, rates, type="spot_rate")

Arguments

prices	vector of variable prices
rates	vector of variable rates
type	rates defined as either "spot_rate" or "zcb_price"

Details

For spot rates: ∑_{k=1}^n\frac{prices_k}{(1+rates_k)^k}=∑_{k=1}^n\frac{X}{(1+rates_k)^k}

For zero coupon bond prices: ∑_{k=1}^nprices_k*rates_k=∑_{k=1}^nX*rates_k

Where X= fixed swap price.

Value

The fixed swap price.

Note

Length of the price vector and rate vector must be of the same length.

Author(s)

Kameron Penn and Jack Schmidt

See Also

swap.rate

Examples

swap.commodity(prices=c(103,106,108), rates=c(.04,.05,.06))

swap.commodity(prices=c(103,106,108), rates=c(.9615,.907,.8396),type="zcb_price")

swap.commodity(prices=c(105,105,105), rates=c(.85,.89,.80),type="zcb_price")

FinancialMath documentation built on May 1, 2019, 11:16 p.m.