Financial Toolbox

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.

SIA Semi-Annual Yield Conventions

Yield Functions