Sidharth Malhotra > finance-bdt-0.01 > Finance::BDT



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Finance::BDT - Implements BDT yield curve model


  use Finance::BDT;
  use Data::Dumper
  my @y = (0, 0.0283, 0.029, 0.0322, 0.0401, 0.0435, 0.0464, 0.0508, 0.0512);        ## YTM on strips
  my $vol = 0.20;  ## constant volatility
  my $epsilon = 0.01;
  my ($r, $d, $A) = Finance::BDT::bdt( -yields => \@y, -epsilon => $epsilon, -volatility => $vol );
  print "Short Rates: \n", Dumper $r;
  print "Discount Prices: \n", Dumper $d;
  print "Asset State Prices: \n", Dumper $A;


  Sample implementation of Black-Derman-Toy model.


Finance::BDT implements a constant volatility Black-Derman-Toy model in Perl. Not that you should be building your curves in perl, but now you can. The current implementation works with constant volatility but I am testing a version which allows you to pass in a term structure of volatilities. The input is the zero curve (as observed yields), a constant volatility, and a limit for the numerical solution. The function returns the interest rate tree as a list of lists (first index being the time period, and second being the position with the lowest rate having index 0). Three trees are returned: the short rates at each period, the discount prices and most importantly the state prices.

The examples directory has an untested sample implementation in C for the brave.


- Use a term structure of volatilies - Be able to price an interest rate derivative based on the asset prices - Be able to perturb and re-price the instrument - Implement the actual calculation in C (maybe using Inline::C)


None by default.


Black, F., Derman, E., and Toy, W. "A one-factor model of interest rates and its application to treasury bond options," Financial Analysts Journal, 46 (1990), 33-39.

Hull, J. and White, A., "One-Factor interest Rate Models and the Valuation of Interest Rate Derivative Securities," Journal of Financial and Quantitive Analysis, 28 (1993), 235-254.

Klose, Chrisoph and Yuan, Li Chang. Implementation of the Black, Derman and Toy Model.


Sidharth Malhotra, sidharth dot malhotra at gmail dot com


Copyright 2005 by Sidharth Malhotra

This library is free software; you can redistribute it and/or modify it under the same terms as Perl itself.

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