A new version of RIO and RIO Function Library has been released. Among various updates and bug fixes the new version 4.3.2 features two entirly new functionalities; Calculations on Bond Forwards/Futures and present value calculations for a user specified cash flow.
Bond Forwards/Futures
This version of RIO introduces two new functions for Bond Forwards/Futures. The data setup is designed to support the multi-basket contract setup for the Danish Mortgage Bond Forwards recently proposed by the Danish Securities Dealers Association. The contract setup covers Bund Futures and US Treasury Bond Futures as well.
The rw_BondFutures function calculates contract level measures like fair forward value, implied repo rate etc. based on the current yield curve or a user supplied repo rate. Risk measures include duration (PVBP), convexity (PVBP2nd) and mapped durations (delta vectors). Individual bond measures are available for all deliverable bonds or specifically for the cheapest-to-deliver bond in each basket.
The proposed Danish Mortgage Bond Futures contract is written on baskets of callable mortgage backed bonds. A second function, rw_TSBondFutures, employs RIO's prepayment modelling framework to calculate option adjusted risk measures for these contracts. The user is able to perform sensitivity analysis with respect to option adjusted spread, yield curve shifts, prepayment forecasts etc.
Present value calculations on a user specified cash flow
A new function rw_PVCashflow has been included in the Basic Bond Analytics category. This function enables the user to calculate present values, durations and convexities on a user defined cash flow. Apart from the cash flow itself a yield curve and a trade convention has to be specified. The cash flow is specified with a list of payment dates, interest payments and repayments.
The rw_PVCashflow functions makes it easy to quantify the present value effects of changes in the cash flow. Alternatively the function can be used to analyse the present value changes of a arbitrary cashflow, given different shifts to the yield curve.