|Financial Derivitives Toolbox Release Notes|
This section introduces the new features and enhancements added in the Financial Derivatives Toolbox 2.0 since Version 1.0 (Release 12.1).
|Note The Financial Derivatives Toolbox 2.0 was initially released in Web-downloadable form after Release 12.1 was released, but before Release 13. There are no changes between the post-Release 12.1 version of the Financial Derivatives Toolbox 2.0 and the version shipped with Release 13.|
Version 2.0 of the Financial Derivatives Toolbox adds support for the Black-Derman-Toy (BDT) model for pricing interest rate derivatives. In the BDT model all security prices and rates depend upon the short rate (annualized one-period interest rate). The model uses long rates and their volatilities to construct a tree of possible future short rates. It then determines the value of interest rate sensitive securities from this tree.
The Black-Derman-Toy model works with a recombining tree. A recombining tree is the opposite of a bushy tree (used with the Heath-Jarrow-Morton (HJM) introduced in Version 1). A recombining tree has branches that recombine over time. From any given node, the node reached by taking the path up-down is the same node reached by taking the path down-up.
|Financial Derivitives Toolbox Release Notes||New Functions in Version 2.0|