Internal Design of Inflation CapFloor Engine

Overview

Inflation option can be cap and floor. An inflation cap (floor) is a financial asset that offers protection against inflation being higher (lower) than a given rate of inflation, and can therefore be used by investors to insure against such inflation outcomes.

Implemention

the YoYInflationBlackCapFloorEngine is year-on-year inflation cap/floor engine based on black formula. The structure of the engine is shown as the figure below:

Figure 1 architecture on FPGA

As we can see from the figure, the engine mainly contains 4 functions.

  1. function discountFactor: the discount factor is calculated at the corresponding time point.
  2. function totalVariance: the total variance of volatility is calculated at the corresponding time point.
  3. function yoyRateImpl: the year-on-year forward rate is calculated at the corresponding time point.
  4. function blackFormula: the black formula calculates the value of the option based on the results of the three functions mentioned above.

Finally, the addition of the results from each time point is the final price (NPV).

Profiling

The hardware resource utilizations are listed in the following table (from Vivado 19.1 report).

Table 11 Table 1 Hardware resources
Engine BRAM URAM DSP FF LUT clock period(ns)
YoYInflationBlackCapFloorEngine 0 0 170 33129 31999 3.210