Calculates Bond Option price in Hull white (HW) model using Black analytical formula

Plots forward forward rate curves for input parameters:

1.Hull white model parameters a,sigma for
% dr(t)=[nu(t) -a*r(t)]*dt + sigma*dW(t)

2.Forward rate term structure assuming continuos compounding

Calculates price of European swaption in Hull White model using Jamshidian trick of decomposing option on a coupon bearing bond into a portfolio of put options on bond options which are based on a spot rate r* which satisfies the equation as described in the paper
HW_SWAPTION_FORMULA.pdf

Calculates bond option price for two-factor vasicek model (G2++) based on analytical formula

For the G2++ model, the interest rate rt is given by
rt = x1,t +x2,t +b(t)
where the dynamics of the risk factors are governed by
dx1 = −κ1*x1*dt +σ1 *dZ1
dx2 = −κ2*x2*dt +σ2*(ρ*dZ1 + sqrt(1 − ρ^2)* dZ2)
Here, b(t) is a function which is determined by fitting the current interest rate term structure and ρ is the correlation coefficient between the 2 factors.

Author : Marcelo Scherer Perlin
Quotes:
This function performs the classical pairs trading framework over a matrix of prices using MatLab. The basic idea of pairs trading is to take advantage of market mean reversion behavior in order to make profit out of short and long positions. More details about this type of quantitative trading strategy can be found at the word document in the zip file. This function will calculate the total raw and excessive return for each type of trade and also the total with input parameters d,window,t and ut.

This function was used for the paper found at:

http://ssrn.com/abstract=952242