fairdelivery

Compute fair delivery price of underlying asset for BondFuture, CommodityFuture, EquityIndexFuture, or FXFuture instrument

Since R2022a

Syntax

[FairDeliveryPrice,FairFuturePrice,AccruedInterest] = fairdelivery(InstrumentObject,SpotPrice,DiscountCurve)

Description

[FairDeliveryPrice,FairFuturePrice,AccruedInterest] = fairdelivery(InstrumentObject,SpotPrice,DiscountCurve) computes the fair delivery price of the underlying asset for a BondFuture, CommodityFuture, FXFuture, or EquityIndexFuture instrument object.

Examples

Compute Fair Delivery Price of Underlying Bond for BondFuture Instrument

This example shows the workflow to price a BondFuture instrument and then use fairdelivery to compute the fair delivery price for the underlying FixedBond.

Create ratecurve Object

Create a ratecurve object using ratecurve.

Settle = datetime(2022,3,1);
ZeroTimes = [calmonths(6) calyears([1 2 3 4 5 7 10 20 30])];
ZeroRates = [0.0052 0.0055 0.0061 0.0073 0.0094 0.0119 0.0168 0.0222 0.0293 0.0307]';
ZeroDates = Settle + ZeroTimes;
ZeroCurve = ratecurve("zero",Settle,ZeroDates,ZeroRates,Compounding=2);

Create Underlying FixedBond Instrument Object

Use fininstrument to create a FixedBond instrument object.

FixB = fininstrument("FixedBond",Maturity=datetime(2032,9,1),CouponRate=0.05,Name="fixed_bond_instrument")

FixB = 
  FixedBond with properties:

                  CouponRate: 0.0500
                      Period: 2
                       Basis: 0
                EndMonthRule: 1
                   Principal: 100
    DaycountAdjustedCashFlow: 0
       BusinessDayConvention: "actual"
                    Holidays: NaT
                   IssueDate: NaT
             FirstCouponDate: NaT
              LastCouponDate: NaT
                   StartDate: NaT
                    Maturity: 01-Sep-2032
                        Name: "fixed_bond_instrument"

Create BondFuture Instrument Object

Use fininstrument to create a BondFuture instrument object.

BondFut = fininstrument("BondFuture",Maturity=datetime(2022,9,1),QuotedPrice=86,Bond=FixB,ConversionFactor=1.43,Name="bondfuture_instrument")

BondFut = 
  BondFuture with properties:

            Maturity: 01-Sep-2022
         QuotedPrice: 86
                Bond: [1×1 fininstrument.FixedBond]
    ConversionFactor: 1.4300
            Notional: 100000
                Name: "bondfuture_instrument"

Create Future Pricer Object

Use finpricer to create a Future pricer object and use the ratecurve object with the DiscountCurve name-value argument.

outPricer = finpricer("Future",DiscountCurve=ZeroCurve,SpotPrice=125)

outPricer = 
  Future with properties:

    DiscountCurve: [1×1 ratecurve]
        SpotPrice: 125

Price BondFuture Instrument

Use price to compute the price and price result for the BondFuture instrument.

[Price,outPR] = price(outPricer,BondFut)

Price = 
-151.9270

outPR = 
  priceresult with properties:

       Results: [1×4 table]
    PricerData: []

outPR.Results

ans=1×4 table
     Price     FairDeliveryPrice    FairFuturePrice    AccruedInterest
    _______    _________________    _______________    _______________

    -151.93       1.2283e+05            85.893                0       

Compute Fair Delivery Price

Use fairdelivery with the BondFuture instrument to compute the fair delivery price for the underlying FixedBond.

SpotPrice = 125; % Clean spot price for $100 face value of underlying bond.
[FairDeliveryPrice,FairFuturePrice,AccruedInterest] = fairdelivery(BondFut,SpotPrice,ZeroCurve)

FairDeliveryPrice = 
1.2283e+05

FairFuturePrice = 
85.8935

AccruedInterest = 
0

Compute Fair Delivery Price for Multiple FXFuture Instruments

This example shows the workflow to price multiple FXFuture instruments and then use fairdelivery to compute the fair delivery price for the FXFuture instruments.

Create ratecurve Objects

Create ratecurve objects using ratecurve for the foreign and domestic zero curves.

% Define Foreign Zero Curve
Settle = datetime(2022, 3, 1);
ForeignZeroTimes = [calmonths(6) calyears([1 2 3 4 5 7 10 20 30])]';
ForeignZeroRates = [0.0031 0.0035 0.0047 0.0058 0.0062 0.0093 0.0128 0.0182 0.0223 0.0285]';
ForeignZeroDates = Settle + ForeignZeroTimes;
ForeignRC = ratecurve('zero', Settle, ForeignZeroDates, ForeignZeroRates);

% Define Domestic Zero Curve
DomesticZeroTimes = [calmonths(6) calyears([1 2 3 4 5 7 10 20 30])]';
DomesticZeroRates = [0.0052 0.0055 0.0061 0.0073 0.0094 0.0119 0.0168 0.0222 0.0293 0.0307]';
DomesticZeroDates = Settle + DomesticZeroTimes;
DomesticRC = ratecurve('zero', Settle, DomesticZeroDates, DomesticZeroRates);

Create FXFuture Instrument Object

Use fininstrument to create a FXFuture instrument object for three FX Future instruments.

FXFut = fininstrument("FXFuture",Maturity=datetime([2022,9,1 ; 2022,10,1 ; 2022,11,1]),QuotedPrice=[0.78 ; 0.82 ; 0.86],ForeignRateCurve=ForeignRC,Notional=200000,Name=["FXfuture_instrument1";"FXfuture_instrument2";"FXfuture_instrument3"])

FXFut=3×1 FXFuture array with properties:
    Maturity
    QuotedPrice
    ForeignRateCurve
    Notional
    Name

Create Future Pricer Object

Use finpricer to create a Future pricer object and use the ratecurve object with the DiscountCurve name-value argument.

outPricer = finpricer("Future",DiscountCurve=DomesticRC,SpotPrice=0.79)

outPricer = 
  Future with properties:

    DiscountCurve: [1×1 ratecurve]
        SpotPrice: 0.7900

Price FXFuture Instruments

Use price to compute the prices and price results for the FXFuture instrument.

[Price,outPR] = price(outPricer,FXFut)

Price = 3×1
104 ×

    0.2162
   -0.5789
   -1.3732

outPR=1×3 priceresult array with properties:
    Results
    PricerData

outPR.Results

ans=1×4 table
    Price     FairDeliveryPrice    FairFuturePrice    AccruedInterest
    ______    _________________    _______________    _______________

    2161.7       1.5817e+05            0.79084               0       

ans=1×4 table
    Price    FairDeliveryPrice    FairFuturePrice    AccruedInterest
    _____    _________________    _______________    _______________

    -5789       1.5819e+05            0.79097               0       

ans=1×4 table
    Price     FairDeliveryPrice    FairFuturePrice    AccruedInterest
    ______    _________________    _______________    _______________

    -13732       1.5822e+05            0.7911                0       

Compute Fair Delivery for FXFuture Instruments

Use fairdelivery with the FXFuture instruments to compute the fair delivery price for the FXFuture instruments.

SpotPrice = 0.79; % Quoted in domestic currency for one unit of foreign currency
[FairDeliveryPrice,FairFuturePrice,AccruedInterest] = fairdelivery(FXFut(1),SpotPrice,DomesticRC)

FairDeliveryPrice = 
1.5817e+05

FairFuturePrice = 
0.7908

AccruedInterest = 
0

[FairDeliveryPrice,FairFuturePrice,AccruedInterest] = fairdelivery(FXFut(2),SpotPrice,DomesticRC)

FairDeliveryPrice = 
1.5819e+05

FairFuturePrice = 
0.7910

AccruedInterest = 
0

[FairDeliveryPrice,FairFuturePrice,AccruedInterest] = fairdelivery(FXFut(3),SpotPrice,DomesticRC)

FairDeliveryPrice = 
1.5822e+05

FairFuturePrice = 
0.7911

AccruedInterest = 
0

Input Arguments

InstrumentObject — Instrument object

BondFuture object | CommodityFuture object | EquityIndexFuture object | FXFuture object

Instrument object, specified using a previously created instrument object for one of the following: BondFuture, CommodityFuture, FXFuture, or EquityIndexFuture.

Note

If the InstrumentObject is a vector of instruments, you must use fairdelivery separately with each instrument.

Data Types: object

SpotPrice — Quoted spot price for underlying asset to be delivered

numeric

Quoted spot price for underlying asset to be delivered, specified as SpotPrice and a numeric value that depends on the type of future instrument being priced:

• BondFuture instrument — Clean spot price quoted for $100 face value of underlying bond

• CommodityFuture instrument — Spot price for underlying commodity quantity specified in contract

• EquityIndexFuture instrument — Spot equity index value

• FXFuture instrument — Spot price quoted in domestic currency for one unit of foreign currency

Data Types: double

DiscountCurve — ratecurve object for discounting cash flows

ratecurve object

ratecurve object for discounting cash flows, specified as DiscountCurve and the name of a previously created ratecurve object.

Data Types: object

Output Arguments

FairDeliveryPrice — Fair delivery price for underlying asset

numeric

Fair delivery price for underlying asset, returned as a numeric. Depending on InstrumentObject, the FairDeliveryPrice output is defined:

• BondFuture instrument — Fair delivery price (full cash price) for underlying bond

• CommodityFuture instrument — Fair delivery price for underlying commodity

• EquityIndexFuture instrument — Fair delivery price for equity index future

• FXFuture instrument — Fair delivery price for FX future in domestic currency

FairFuturePrice — Fair future price (clean price) for $100 face value

numeric

Fair future price (clean price) for 100 face value, returned as a numeric. Depending on InstrumentObject, the FairFuturePrice output is defined:

• BondFuture instrument — Fair future price (clean price) for $100 face value

• CommodityFuture instrument — Fair future price

• EquityIndexFuture instrument — Fair future price

• FXFuture instrument — Fair future price in domestic currency for one unit of foreign currency

AccruedInterest — Accrued interest at delivery

numeric

Accrued interest at delivery, returned as a numeric. Depending on InstrumentObject, the AccruedInterest output is defined:

• BondFuture instrument — Accrued interest at delivery for $100 face value

• CommodityFuture instrument — Accrued interest at delivery

• EquityIndexFuture instrument — Accrued interest at delivery

• FXFuture instrument — Accrued interest at delivery

More About

Fair Delivery Price

The fair delivery price for a futures instrument is the price at which a commodity or financial instrument will be delivered when the futures contract expires.

The fair delivery price reflects the expected future spot price of the underlying asset at the time of delivery, adjusted for various factors such as carrying costs, interest rates, and the time until expiration.

Version History

Introduced in R2022a