| Financial Toolbox |
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Pricing Functions
This example shows how easily you can compute the price of a bond with an odd first period using the SIA-compliant function bndprice. Assume you have a bond with these characteristics
Settle = '11-Nov-1992';
Maturity = '01-Mar-2005';
IssueDate = '15-Oct-1992';
FirstCouponDate = '01-Mar-1993';
CouponRate = 0.0785;
Yield = 0.0625;
Allow coupon payment period (Period = 2), day-count basis (Basis = 0), and end-of-month rule (EndMonthRule = 1) to assume the default values. Also, assume there is no odd last coupon date and that the face value of the bond is $100. Calling the function
[Price, AccruedInt] = bndprice(Yield, CouponRate, Settle, ...
Maturity, [], [], [], IssueDate, FirstCouponDate)
returns a price of $113.60 and accrued interest of $0.59.
Similar functions compute prices with regular payments, odd first and last periods, as well as prices of Treasury bills and discounted securities such as zero-coupon bonds.
Note:
bndprice and other SIA-compliant functions use nonlinear formulas to
compute the price of a security. For this reason, the Financial Toolbox uses
Newton's method when solving for an independent variable within a formula.
See any elementary numerical methods textbook for the mathematics
underlying Newton's method.
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