IMPLIED ZERO-COST COLLAR CAP-RATE GIVEN FLOOR-RATE ITERATION PROCEDURE



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  1. Log into your account or if you are a new user, register your account and enable two factor authentication.
  2. Click on the [Zero-cost collar cap-strike-rate] button, this will take you to the Dynamic-text-blocks parameters page.

Dynamic text-blocks parameters page

  1. Select to enter flat or time-varying yield curve at indicated times.
  2. Select to enter flat or time-varying notional principal at indicated payment times.
  3. Select to enter flat or time-varying caplet volatilities at indicated interest-rate observation times.
  4. Select to enter flat or time-varying floorlet volatilities at indicated interest-rate observation times.
  5. Enter number of outstanding interest-rate observation times resulting in future collar payments.
  6. Enter the tenor period of the collar in years.
  7. Enter the time till next collar payments in years.
  8. Click the submit button, and this will take you to the array populating page.

Array populating page

  1. Enter zero rates convertible (1.0/tenor) times per year at indicated times.
  2. Enter notional principals at indicated payment times.
  3. Enter annualised caplet volatilities at indicated interest-rate observation times.
  4. Enter annualised floorlet volatilities at indicated interest-rate observation times.
  5. Click the submit button, and this will take you to the Zero-cost collar cap-strike-rate iteration parameters page.

Zero-cost collar cap-strike-rate iteration parameters page

  1. Select the name of currency of valuation from the drop-down list.
  2. Enter the floor strike rate convertible (1.0/tenor) times per year.
  3. If the time till next collar payment is less than or equal to the tenor period, you will be prompted to enter the observed interest-rate resulting in next collar payment.
  4. Enter allocated expenses and tax to be added to the pure collar price.
  5. Enter profit percentage to be loaded to the calculated sum of pure collar price and dealing expenses and tax. If the profit-loading is x and the sum of pure collar price plus expenses and tax is P, then the final price will be calculated as (1 + x)*P.It is important to note that valuation is done from a dealer/broker's perspective. The profit-charge is charged by the dealer/broker.
  6. Click the submit button and this will take you to the output display page.

Output display page

  1. You can view pricing model output together with input parameters you entered.
  2. At the bottom of the page you can click on the button to create database record for the current model output. This will take you to the create database record page where you should click on the create button to create the database record.
  3. After clicking on the create button to create the database record, you will be taken to the database records view page, where you can scroll vertically or horizontally to view database records including the one you just created.
  4. You can filter database records according to the currency of valuation using the filter box. You can click on the details link on the extreme right of a particular database record, this will take you to the particular database record details page.