Processes Category Group

1. CapeTools Simple Processes

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   General Description

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   Functions to construct various Equity, Future, FX or Commodity type process objects. A process object simulates an asset value (or a correlated set of asset values) over time.
   
   The following asset functions can be used :
   
   

   • GBSProcess() -Generalized BlackScholes Process.
   • BS73Process() - Black-Scholes (1973) stochastic process.
   • BlackProcess() - Black (1976) stochastic process.
   • GKProcess() - Garman-Kohlhagen (1983) stochastic process.
   • Merton76Process() - Merton (1976) Process.

   
   
   Some basic stochastic process objects that can be constructed are :
   
   

   • GBMProcess() - Geometric Brownian Motion Process.
   • OUProcess() - OrnsteinUhlenbeck Process.
   • SQRTProcess() - Square Root Process.
   • SQRTProcess() - Square Root Process.

   
   
   Finally you can group a collection of stochastic process objects along with a correlation matrix via the following function :
   
   

   • CorrArrayProcesses() - Creates an array of correlated one dimensional stochastic processes.

   
   
   All of these objects can be passed to various pricing functions (see the CapeTools EngineOptions category of functions).
   
   You can set up your own simulation of these processes by using the functions contained within the CapeTools (Full) Process Simulation or CapeTools (Compact) Process Simulation category of functions.
   
   Additionally you can carry out your own generic pricing via the GenericMCPricer, GenericTreePricer or GenericPDEPricer functions.
   
   
   
   
   
2. CapeTools LMM Processes

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   General Description

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   Functions to construct Libor Market Model simulation process objects.
   
   Given Libor Libor Market Model volatility and correlation specification objects (see CapeTools EngineOptions), creates a Libor Forward Market Simulation Process object to be used within the CapeTools LMM Process Simulation or CapeTools Generic IR LMM MonteCarlo Pricer category of functions.
   
   Volatility and correlation specification objects can be produced via a call to any of the appropriate functions within the CapeTools LMM Volatility/Correlation Models category of functions.
   
   Within the LMMSimProcess function, you can set the number of simulations to zero (0). In this case no simulations will be generated, but you can request a new simulation path from this object by executing the LMMNextPath function. This will return a 2 column array of rates and discount factors. You can also perform generic montecarlo pricing via the GenericLMM_MCPricer function.
   
   
   
3. CapeTools IR Processes

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   General Description

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   Functions to construct short-rate model simulation process objects.
   
   Currently, we only have one model defined and that is a single-factor Hull-White (extended Vasicek) Forward short-rate Model process object. Defined as : dr_t = (theta(t) - alpha*r_t)dt + sigma*dW_t, where alpha and sigma are constants
   
   You can set up your own simulation of these processes by using the functions contained within the CapeTools (Full) IR Process Simulation or CapeTools (Compact) IR Process Simulation category of functions.