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oBond3_Price( ) Example

Description

Consider a 20-year bond trading at a yield of 7.20% with an annual coupon of 7.00%, a dated date of 15 March 1994, a maturity date of 15 March 2014, and a face value of $500,000. The discount and accrual bases are Act/365, and domestic yield is quoted on an annually compounded basis.

There is an ex-dividend period of 5 business days, all prices are rounded to the nearest cent (ie 2dp), while cash flows that occur on a non-business day are not adjusted. Coupons are exact and the bond is priced using the ISMA formula. The final period starts on the ex-date of the penultimate coupon.

What is the price of this bond assuming a settlement date of 12 March 2003?

 

 

Function Specification

=oBond3_Price(0.072, {"12/3/03", "15/3/94", "", "", "15/3/14"}, 500000, 0.07, 1, 1, 1, 1, 1, 4, 3, 5, 2, 2, 0, 1, , 0)

 

 

Parameter Name

Parameter Value

 

 

 

 

 

Yield

0.0720

 

 

Settlement Date

12/3/2003

 

 

Dated Date

15/3/1994

 

 

First Coupon Date

 

 

 

Penultimate Coupon Date

 

 

 

Maturity Date

15/3/2004

 

 

Face Value

500000

 

 

Coupon Rate

0.07

 

 

Coupon Frequency

1

 

 

Compounding Frequency

1

 

 

Business Day Convention

1

 

 

Yield Method

1

 

 

Final Period Yield Method

1

 

 

Discount Basis

4

 

 

Accrual Basis

4

 

 

ExDate Convention

3

 

 

ExDay Unit

5

 

 

Coupon Type

2

 

 

PPH Rounding

2

 

 

Adjusted End of Month

0

 

 

Final Period Start

1

 

 

Holiday Schedule

 

 

 

Output Flag

0

 

 

 

Solution

The following results are obtained:

Yield

0.0720000

Clean Price

492,650.0000

Accrued Interest

-300.0000

Dirty Price

492,350.0000

Macaulay Duration

8.00596

Modified Duration

7.46825

Convexity

74.22365

Present Value of a Basis Point

367.72416

 

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

 

 

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