com.webcab.ejb.finance.bonds
Interface ForwardRates

All Superinterfaces:

EJBObject, Remote

public interface ForwardRates

extends EJBObject

Within this Enterprise JavaBean we provide methods for the evaluation of forward rates and forward rate agreements.

Method Summary

double	forwardRate(double firstZeroRate, double secondZeroRate, Date evaluationDate, Date firstMaturityDate, Date secondMaturityDate, BusinessCalendar businessCalendar) Calculates the forward rate for a period of time between the `firstMaturity' and the `secondMaturity' when the continuously compounded zero rates for the `firstMaturity' and `secondMaturity' are known.
double	forwardRate(double firstZeroRate, double secondZeroRate, double firstMaturity, double secondMaturity) Calculates the forward rate for a period of time between the `firstMaturity' and the `secondMaturity' when the continuously compounded zero rates for the `firstMaturity' and `secondMaturity' are known.
double	forwardRateAgreement(double principleSum, double agreedRate, Date evaluationDate, Date firstMaturityDate, Date secondMaturityDate, double forwardRate, double zeroRate, BusinessCalendar businessCalendar) Calculates the value of the forward rate agreement (FRA) for a holder which pays an interest rate `agreedRate' within the period between `firstMaturity' and `secondMaturity' on a principle sum `principle'.
double	forwardRateAgreement(double principleSum, double agreedRate, double firstMaturity, double secondMaturity, double forwardRate, double zeroRate) Calculates the value of the forward rate agreement (FRA) for a holder which pays an interest rate `agreedRate' within the period between `firstMaturity' and `secondMaturity' on a principle sum `principle'.
double	settlement(double principalSum, double agreedRate, Date settlementDate, Date firstMaturityDate, Date secondMaturityDate, double forwardRate, BusinessCalendar businessCalendar) Evaluates the cash settlement (or equivalently, the present value of the cash flows) of a forward rate agreement at the point when the interest period starts (which is generally when the FRA will be settled in cash).
double	settlement(double principalSum, double agreedRate, double firstMaturity, double secondMaturity, double forwardRate) Evaluates the cash settlement (or equivalently, the present value of the cash flows) of a forward rate agreement at the point when the interest period starts (which is generally when the FRA will be settled in cash).

Methods inherited from interface javax.ejb.EJBObject

getEJBHome, getHandle, getPrimaryKey, isIdentical, remove

Method Detail

forwardRate

public double forwardRate(double firstZeroRate,
                          double secondZeroRate,
                          Date evaluationDate,
                          Date firstMaturityDate,
                          Date secondMaturityDate,
                          BusinessCalendar businessCalendar)
                   throws ForwardRatesDemoException,
                          RemoteException

Calculates the forward rate for a period of time between the `firstMaturity' and the `secondMaturity' when the continuously compounded zero rates for the `firstMaturity' and `secondMaturity' are known.

Parameters:

firstZeroRate - the first of the two zero rates

secondZeroRate - the second of the zero rates

evaluationDate - the date when the forward rate is evaluated

firstMaturityDate - the date of the maturity of the first zero rate

secondMaturityDate - the date of the maturity of the second zero rate

businessCalendar - The instance of a BusinessCalendar interface implementation. Specify null to select the London business calendar.

ForwardRatesDemoException

RemoteException

forwardRate

public double forwardRate(double firstZeroRate,
                          double secondZeroRate,
                          double firstMaturity,
                          double secondMaturity)
                   throws ForwardRatesDemoException,
                          RemoteException

Calculates the forward rate for a period of time between the `firstMaturity' and the `secondMaturity' when the continuously compounded zero rates for the `firstMaturity' and `secondMaturity' are known.

Parameters:

firstZeroRate - the first of the two zero rates

secondZeroRate - the second of the zero rates

firstMaturity - the number of years expressed in decimal format of the maturity of the `firstZeroRate'

secondMaturity - the number of years expressed in decimal format of the maturity of the `secondZeroRate'

ForwardRatesDemoException

RemoteException

forwardRateAgreement

public double forwardRateAgreement(double principleSum,
                                   double agreedRate,
                                   Date evaluationDate,
                                   Date firstMaturityDate,
                                   Date secondMaturityDate,
                                   double forwardRate,
                                   double zeroRate,
                                   BusinessCalendar businessCalendar)
                            throws ForwardRatesDemoException,
                                   RemoteException

Calculates the value of the forward rate agreement (FRA) for a holder which pays an interest rate `agreedRate' within the period between `firstMaturity' and `secondMaturity' on a principle sum `principle'.

Remarks

• The value of the contract to the party who receives the principle sum and pays interest is just the negation of the value calculated here.
• The interest rate paid by the contract and the forward interest rate are usually set to be equal when the FRA is initiated.
• Care should be taken that the various interest rates are expressed with respect to the correct compounded period. In particular, the forward rate and the agreed rate must be expressed with respect to the period `(firstMaturity - secondMaturity)'. Whereas the discounting zero-coupon interest rate is expressed as a continuously compounded rate.

Parameters:

principleSum - the principle sum which changes hands in the FRA

agreedRate - the rate of interest payment (in decimal format, i.e. 1 percent = 0.01) agreed within the period `firstMaturity' and `secondMaturity'. Note that this interest rate is expressed with respect to the compounding period `(firstMaturity - secondMaturity)'

forwardRate - the forward rate for the period between `firstMaturity' and `secondMaturity'. Note that this interest rate is expressed with respect to the compounding period `(firstMaturity - secondMaturity)'

zeroRate - the continuously compounded zero-coupon interest rate for the maturity `secondMaturity'

evaluationDate - the date when the FRA is evaluated.

firstMaturityDate - the date when the FRA begins.

secondMaturityDate - the date when the FRA ends.

businessCalendar - The instance of a BusinessCalendar interface implementation. Specify null to select the London business calendar.

ForwardRatesDemoException

RemoteException

forwardRateAgreement

public double forwardRateAgreement(double principleSum,
                                   double agreedRate,
                                   double firstMaturity,
                                   double secondMaturity,
                                   double forwardRate,
                                   double zeroRate)
                            throws ForwardRatesDemoException,
                                   RemoteException

Calculates the value of the forward rate agreement (FRA) for a holder which pays an interest rate `agreedRate' within the period between `firstMaturity' and `secondMaturity' on a principle sum `principle'.

Remarks

• The value of the contract to the party who receives the principle sum and pays interest is just the negation of the value calculated here.
• The interest rate paid by the contract and the forward interest rate are usually set to be equal when the FRA is initiated.
• Care should be taken that the various interest rates are expressed with respect to the correct compounded period. In particular, the forward rate and the agreed rate must be expressed with respect to the period `(firstMaturity - secondMaturity)'. Whereas the discounting zero-coupon interest rate is expressed as a continuously compounded rate.

Parameters:

principleSum - the principle sum which changes hands in the FRA

agreedRate - the rate of interest payment (in decimal format, i.e. 1 percent = 0.01) agreed within the period `firstMaturity' and `secondMaturity'. Note that this interest rate is expressed with respect to the compounding period `(firstMaturity - secondMaturity)'

firstMaturity - the time in years (in decimal format) at which the FRA begins

secondMaturity - the time in years (in decimal format) at which the FRA expires

forwardRate - the forward rate for the period between `firstMaturity' and `secondMaturity'. Note that this interest rate is expressed with respect to the compounding period `(firstMaturity - secondMaturity)'

zeroRate - the continuously compounded zero-coupon interest rate for the maturity `secondMaturity'

ForwardRatesDemoException

RemoteException

settlement

public double settlement(double principalSum,
                         double agreedRate,
                         Date settlementDate,
                         Date firstMaturityDate,
                         Date secondMaturityDate,
                         double forwardRate,
                         BusinessCalendar businessCalendar)
                  throws ForwardRatesDemoException,
                         RemoteException

Evaluates the cash settlement (or equivalently, the present value of the cash flows) of a forward rate agreement at the point when the interest period starts (which is generally when the FRA will be settled in cash).

Parameters:

agreedRate - the rate of interest payment (in decimal format, i.e. 1% = 0.01) agreed within the period `firstMaturity' and `secondMaturity'. Note that this interest rate is expressed with respect to the compounding period `(firstMaturity - secondMaturity)'

forwardRate - the forward rate for the period between `firstMaturity' and `secondMaturity'. Note that this interest rate is expressed with respect to the compounding period `(firstMaturity - secondMaturity)'

settlementDate - the date when the FRA is settled.

firstMaturityDate - the date when the FRA begins.

secondMaturityDate - the date when the FRA ends.

businessCalendar - The instance of a BusinessCalendar interface implementation. Specify null to select the London business calendar.

ForwardRatesDemoException

RemoteException

settlement

public double settlement(double principalSum,
                         double agreedRate,
                         double firstMaturity,
                         double secondMaturity,
                         double forwardRate)
                  throws ForwardRatesDemoException,
                         RemoteException

Evaluates the cash settlement (or equivalently, the present value of the cash flows) of a forward rate agreement at the point when the interest period starts (which is generally when the FRA will be settled in cash).

Parameters:

agreedRate - the rate of interest payment (in decimal format, i.e. 1% = 0.01) agreed within the period `firstMaturity' and `secondMaturity'. Note that this interest rate is expressed with respect to the compounding period `(firstMaturity - secondMaturity)'

firstMaturity - the time in years (in decimal format) at which the FRA begins

secondMaturity - the time in years (in decimal format) at which the FRA expires

forwardRate - the forward rate for the period between `firstMaturity' and `secondMaturity'. Note that this interest rate is expressed with respect to the compounding period `(firstMaturity - secondMaturity)'

ForwardRatesDemoException

RemoteException