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XLeratorDB/financial Documentation

SQL Server futures price convexity adjustment


ED_FUT_CONV_ADJ_HL

Updated: 29 Mar 2013


Use ED_FUT_CONV_ADJ_HL to convert a Eurodollars futures price into a forward rate using the Ho Lee convexity adjustment formula.
Syntax
SELECT [wctFinancial].[wct].[ED_FUT_CONV_ADJ_HL](
  <@Price, float,>
 ,<@Vol, float,>
 ,<@T1, float,>
 ,<@T2, float,>)
Arguments
@Price
the price of the Eurodollars futures contract. @Price is an expression of type float or of a type that can be implicitly converted to float.
@Vol
the volatility associated with Eurodollars futures contract. @Vol is an expression of type float or of a type that can be implicitly converted to float.
@T1
the amount of time, in years, until the delivery of the futures contract. @T1 is an expression of type float or of a type that can be implicitly converted to float.
@T2
the amount of time, in years, until the Maturity of the underlying Eurodollar deposit. @T2 is an expression of type float or of a type that can be implicitly converted to float.
Return Type
float
Remarks
·         @Vol must be >= 0
·         If @T2 is NULL , then @T2 = @T1 + 0.25
Example
In this example we calculate the convexity adjusted forward rates associated with the Eurodollar futures strip as of 2013-03-25.
SELECT dc
,wct.ED_FUT2DATE(dc,'2013-03-25') AS Delivery
,(100 - p)/100 as [Forward Rate]
,wct.ED_FUT_CONV_ADJ_HL(
 p                                  --@Price
,v                                  --@Vol
,wct.ED_FUTYF(dc,'2013-03-25',NULL) --@T1
,NULL                               --@T2
) as [Adjusted Forward Rate]
FROM (
      SELECT 'M3',99.675, .0008 UNION ALL
      SELECT 'U3',99.640, .0010 UNION ALL
      SELECT 'Z3',99.610, .0013 UNION ALL
      SELECT 'H4',99.580, .0017 UNION ALL
      SELECT 'M4',99.550, .0021 UNION ALL
      SELECT 'U4',99.435, .0023 UNION ALL
      SELECT 'Z4',99.65, .0027
      ) n(dc,p,v)
 
This produces the following result.
dc   Delivery             Forward Rate  Adjusted Forward Rate
---- ---------- ---------------------- ----------------------
M3   2013-06-19                0.00325               0.003294
U3   2013-09-18                 0.0036               0.003648
Z3   2013-12-18                 0.0039               0.003952
H4   2014-03-19                 0.0042               0.004254
M4   2014-06-18                 0.0045               0.004556
U4   2014-09-17                0.00565               0.005717
Z4   2014-12-17                 0.0035               0.003534
 


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