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oBond3_Yield( ) Example

Description

Consider a 10-year bond trading at a clean price of $99.50 (PPH) with an annual coupon of 7.00%, a dated date of 1 September 2000, a first coupon date of 1 November 2000, a maturity date of 1 November 2010, and a face value of $1,000,000. The discount and accrual bases are Act/Act (actual), and domestic yield is quoted on an annually compounded basis.

There is no ex-dividend period, cash flows are rounded to 12dp, and cash flows that fall on a non-business day are postponed until the next business day. Coupons are exact and the final period starts on the actual penultimate coupon date. The bond is priced using the ISMA formula.

What is the current yield of this bond assuming a settlement date of 15 September 2000, and the following holiday schedule?

 

 

 

Holiday Schedule

 

Holiday Schedule (cont)

 

 

.

 

.

 

 

25/12/2000

 

1/1/2003

 

 

26/12/2000

 

28/3/2003

 

 

1/1/2001

 

7/8/2003

 

 

3/4/2001

 

25/12/2003

 

 

6/6/2001

 

26/12/2003

 

 

25/12/2001

 

1/1/2003

 

 

26/12/2001

 

17/5/2004

 

 

1/1/2002

 

25/12/2004

 

 

5/5/2002

 

26/12/2004

 

 

20/8/2002

 

1/1/2005

 

 

25/12/2002

 

4/7/2005

 

 

26/12/2002

 

19/10/2005

 

 

 

 

 

Function Specification

=oBond3_Yield(99.5, {"15/9/00", "1/9/00", "1/11/00", "", "1/11/10"}, 1000000, 0.07, 1, 1, 3, 1, 1, 1, 1, , 2, 12, 0, 2, D5:D28, 0)

 

 

 

Function Parameter

Parameter Value

 

 

.

 

 

Clean Price

99.50

 

 

Settlement Date

15/9/2000

 

 

Dated Date

1/9/2000

 

 

First Coupon Date

1/11/2000

 

 

Penultimate Coupon Date

 

 

 

Maturity Date

1/11/2010

 

 

Face Value

1000000

 

 

Coupon Rate

0.07

 

 

Coupon Frequency

1

 

 

Compounding Frequency

1

 

 

Business Day Convention

3

 

 

Yield Method

1

 

 

Final Period Yield Method

1

 

 

Discount Basis

1

 

 

Accrual Basis

1

 

 

ExDate Convention

1

 

 

ExDay Unit

 

 

 

Coupon Type

2

 

 

PPH Rounding

12

 

 

Adjusted End of Month

0

 

 

Final Period Start

1

 

 

Holiday Schedule

"D5:D28"

 

 

Output Flag

0

 

 

 

where the cell range D5:D29 contains the holiday schedule. This bond had a stub first period (1/9/2000 - 1/11/2000) and a standard last period.

 

Solution

The following results are obtained from setting the output flag to 0.

Yield

0.070745

Clean Price

995,000.0000

Accrued Interest

2,684.9315

Dirty Price

997,684.9315

Macaulay Duration

7.54917

Modified Duration

7.05038

Convexity

65.79504

Present Value of a Basis Point

703.40616

 

 

For further details on how the above prices and statistics are calculated, see the ISMA formula.

 

 

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