WebCab Bonds (J2EE Edition) - Summary

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Summary

WebCab Bonds (J2EE Edition) by WebCab

URLs: webcab-bonds-j2ee, webcab bonds j2ee, webcabbondsj2ee, webcab

EJB Suite offering general Interest derivatives pricing framework: set contract and vol/price/interest models and run MC. WebCab Bonds (J2EE Edition) allows the pricing and risk analytics of interest rate cash and derivative products. Also covered: fundamental theory of bonds including: Treasury bonds, Yield/Pricing, Zero Curve, Forward rates/FRAs, Duration and Convexity. Also covered are the topics of Fixed-Interest bonds.

WebCab Bonds implements the following functionality:

General Interest Derivatives Pricing Framework

General Pricing Framework offers the following predefined Models and Contracts:

Contracts: Asian Option, Binary Option, Cap, Coupon Bond, Floor, Forward Start stock option, Lookback Option, Ladder Option, Vanilla Swap, Vanilla Stock Option, Zero Coupon Bond, Barrier Option, Parisian Option, Parasian Option, Forward and Future.

Interest Rate Models: Constant Spot Rate, Constant (in time) Yield curve, One factor stochastic models (Vasicek, Black-Derman-Toty (BDT), Ho & Lee, Hull and White), Two factor stochastic models (Breman & Schwartz, Fong & Vasicek, Longstaff & Schwartz), Cox-Ingersoll-Ross Equilibrium model, Spot rate model with automatic yield (Ho & Lee, Hull & White), Heath-Jarrow-Morton forward rate model, Brace-Gatarek-Musiela (BGM) LIBOR market model.

Price Models: Constant price model, General deterministic price model, Lognormal price model, Poisson price model.

Volatility Models: Constant Volatility Models, General Deterministic Volatility model, Hull & White Stochastic model of the Variance, Hoston Stochastic Volatility model.

Once the contract and the price/interest/vol model combination has been set you able to run the Monte Carlo Princing Engine which allows:

Evaluate Price: Evaluate price estimate accordance to number of iterations or maximum expected error

Estimate Error: Evaluate the standard deviation of the price estimate, and the minimum/maximum expected price for a given confidence level.

Fundamental Theory of Bonds

Pricing and Yield

Pricing - Discounted cash flows model in accordance with the risk free interest rate

Yield to Maturity (YTM) - the YTM (also known as the Internal rate of Return (IRR) can be evaluated for any bond where the market price and the coupon payments until maturity are known.

Treasury Price - evaluate the price of a Treasury bond from the Treasury zero rates.

Bond Yield - returns the yield of a Treasury bond when the price and coupons are known.

Par Yield - Methods for calculating the Par Yield where the number of yearly payments and the annuity may vary.

Constructing the Zero Rate Curve - using the technique known as bootstrapping and linear interpolation one is able to construct the zero rate curve.

Forward Rates and FRAs

Evaluation of Forward Rates - the forward rate for a given period can be evaluated from the zero rates at the start and end of that period.

Forward Rate Agreements (FRAs) - a method which shows to value of a FRA and the cash flows when the contract is settled.

Duration and Convexity

Duration - the Duration of a bond, bond portfolio, interest rate future and the rescaling of Duration according to different interest compounding conventions.

Duration based hedging - Duration-Hedge Ratio, Convexity and its use in hedging interest rate risk.

Yield of Fixed-Interest Bonds on Interest payment dates

Simple Yield to Maturity - As used in Japanese bond markets to calculate the yield to maturity (simple yield to maturity) rather than the usual compound interest method (redemption yield).

Gross Redemption Yield - For an interest payment date the gross redemption yield is given. Webcab follows the convention in the US and UK to calculate and express redemption yield as a yield per annum, convertible half-yearly.

Net Redemption Yield - The gross redemption yield on an interest payment date taking into account the investors income tax position.

Holding period return - The yield over the period the stock was held by the investor according to US and UK interest payment conventions.

Rate of Payments - Knowing the series of payments of one per interval payable in arrears for a number of intervals.

Series of Payments - Knowing the rate of interest per interval and the number of intervals.

In implementing the above procedures it has often be necessary to find solutions of polynomial equations. In order to find these solutions WebCab have used the following techniques:

Interval Bisection Method - A robust method that always finds a solution or a singularity inside a bracketed interval.

Newton-Raphson Method - Given a first approximation to a root and the differential of the function this procedure will always produce a solution. Implementing this procedure for polynomial functions of one variable.

Interest Calculations

Exponents and Series - Law of Exponents, Arithmetic Progression, Finite/Infinite Geometric Series

Simple interest - a deposits value, Real worth, Real return

Compound interest - Accumulated values, Real worth, Real return, Depreciation

Effective and nominal interest - Real return, Force of interest

Accumulated values of annuity-certain - Accumulated annuity certain in arrears, Accumulated annuity certain in advance

Present values

Present value of annuity-certain

Yield - Internal rate, Real and nominal

Real returns - Bonds, Rate of return

This product also contains the following features:

GUI Bundle - bundled suite of graphical user interface JavaBean components (with 1, 2, 4 or site-wide license) allowing the developer to plug-in a wide range of GUI functionality (including charts/graphs) into their client applications

EAR Files - Individual customized EAR files for the most widely used application servers including IBM WebSphere 4.0/5.0, BEA WebLogic 6.1/7.0, Oracle 9iAS, Sun ONE AppServer 7, Ironflare Orion 1.5.2/1.6.0, Borland AppServer 5.0, Sybase EAServer 3.6 and JBoss 2.4.4/3.0.0

Self-Deploy - the relevant servers EAR file will be self-deployed onto supported local application servers during the installation of the self-install package. The supported application servers include IBM WebSphere 4.0/5.0, BEA WebLogic 6.1/7.0, Oracle 9iAS, Borland AppServer 5.0, Ironflare Orion 1.5.2/1.6.0 and JBoss 2.4.4/3.0.0

JDBC Mediator - A server side EJB component which mediates between an EJB component, clients and DBMS. The mediator moves most of a clients JDBC calls to the server and hence greatly increases the speed of JDBC client applications.

Web Application Example - A JSP interactive HTML interface which enables you to test every component method directly from your browser.

Synthetic JDBC - A JSP component to perform EJB calculations on SQL database columns from a remote DBMS. We apply an EJB function to certain rows from the database and list the output in HTML format. This is a powerful feature since it allows you to perform calculations in a JDBC manner without having to code the EJB-to-JDBC transaction yourself as it is all done by the JSP within the Application Server.

UML Models - to assist system architects we provide UML diagrams of this component

EJB Suite offering general Interest derivatives pricing framework: set contract and vol/price/interest models and run MC.

Pricing: WebCab Bonds (J2EE Edition) V1.0 1 Developer License, WebCab Bonds (J2EE Edition) V1.0 4 Developer Team License, WebCab Bonds (J2EE Edition) V1.0 1 Site Wide License (Allows Unlimited Developers at a Single Physical Address)

Evals & Downloads: Read the WebCab Bonds (J2EE Edition) documentation - Requires Acrobat Reader, Download the WebCab Bonds (J2EE Edition) evaluation on to your computer - Limited functionality

Operating System for Deployment: Windows Vista, Windows XP, Windows Server 2003, Windows 2000, Windows NT 4.0, Sun Solaris 9, Sun Solaris 8, HP-UX 11.x, HP-UX 10.x, HP-UX 9.x, IBM AIX 5.x, IBM AIX 4.3.x, Linux Kernel V2.4.x, RedHat Linux 7.x

Architecture of Product: 32Bit

Product Type: Component

Component Type: JavaBean, Java Class, Enterprise JavaBean V2.0

Built Using: Java 2 SDK (JDK 1.3), Java 2 SDK (JDK 1.4)

Application Servers: Oracle WebLogic Server 8.1 (formerly BEA), Oracle WebLogic Server 7.0 (formerly BEA), Oracle WebLogic Server 6.1 with J2EE 1.3 Features(formerly BEA), Oracle WebLogic Server 6.1 (formerly BEA), IBM WebSphere (TM) Application Server 4.0, IBM WebSphere (TM) Application Server 5.0, JBoss (TM) 3.0.x, Oracle Application Server 9i, Borland Enterprise Server

Compatible Containers: JBuilder X, JBuilder 9, JBuilder 7, JBuilder 6, Oracle 9i JDeveloper, NetBeans IDE 3.x, Sun ONE Studio 4 (Formerly FORTE for Java), WebLogic Workshop, IBM WebSphere Studio

Product Class: Business Components

Keywords: bonds interest rates derivatives

Financial finance bank banking insurance

Part numbers: PC-515473-51390 515473-51390 PC-515473-51391 515473-51391 PC-515473-51392 515473-51392