Interpreting Hull–White Swaption Pricing Inputs for Swap Exposure Modeling

Summary

The document asks how to interpret the inputs to a Hull–White one-factor swaption pricing function while modeling the expected exposure of an interest rate swap. It identifies expiries, floating-leg start and end times, fixed-leg payment times, day-count fractions, the fixed coupon, and the reference-rate function as fields the questioner is unsure how to supply. The short-rate process is given, but the document does not provide answers or a worked example explaining the parameter conventions.

Its practical lesson is that swap and swaption pricing requires a schedule of cash-flow dates and accrual fractions, as well as market-rate information, not just the swap’s duration and fixed coupon. The questioner has zero rates at a finite set of timestamps and asks how best to approximate the reference-rate function. Since no response is included, the document offers no evidence for a particular interpolation method or guidance on aligning model inputs with a real contract’s conventions.

Key ideas

• Swaption pricing inputs describe exercise timing and the underlying swap’s payment schedule.
• Floating-leg start and end times identify accrual periods for floating cash flows.
• Day-count fractions represent the year fractions used to calculate coupon payments.
• The question raises how to construct a reference-rate function from discrete zero-rate observations but does not resolve it.

Tags

# Hull-White-1F swaption price Parameters using tf_quant_finance


# Hull-White-1F swaption price Parameters using tf_quant_finance












Sorry for this rather general question but im new in this field. I'm asked to model the Expected Expsoure of an interest rate swap. The Short Rate should be modelled via a 1factor Hull-White model: $dr(t)=\left(\theta(t)-a\cdot r(t)\right) dt + \sigma(t) dW(t)$

I'm trying to price the swap with tf_quant_finance.models.hull_white.swaption_price Link to the Documentation

My problem is I do not understand all the parameters:

- expiries: this should be the the duration of the swap

- floating_leg_start_times: i have no idea what this is

- floating_leg_end_times: i have no idea what this is

- fixed_leg_payment_times: this should be the dates on which the fixed payment is due

- floating_leg_daycount_fractions: i have no idea what this is

- fixed_leg_daycount_fractions: i have no idea what this is

- fixed_leg_coupon: this should be the fixed interest rate

- reference_rate_fn: i only have the zero rate for a finite set of timestamps, so my question would be how to approximate this the best

for the rest of the parameters i know what they are for (or at least what value they have and how i have to use them)

Sorry for asking about some of these basic terms but im not fluent in english (especially not in finace english)

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.