Valuation of FID

Hi Christofer,For this instrument its value today would be the sum of
the presentvalue (pv) of its coupons and the pv of its redemption
value.You have not specified how the redemption value is determined,
so Iwon't deal with it. Regarding the coupons, you also did not say
therate of the coupon, so let's say that is fixed, say at C (e.g.
C=3%).Each coupon appears to be C x (Avg Value of the Index), which
seems tobe like holding C of an Average Rate Option (with a zero
strikeprice), also called an Average Price option (in this case an
AveragePrice Call). Since each coupon is a position in such an
option, theset of coupons is a portfolio of Average Price Calls. Hull
and Whitediscuss valuation for such options, including a reference to
Kemna andVorst (1990) who treated the case when the average is
calculated as ageometric average and the option is European.
Hopefully this provides enough clues for you to take it from here.
Best,Eric
On Sun, Jun 21, 2020 at 10:47 PM Christofer Bogaso<
bogaso.christofer at gmail.com> wrote:

Hi,
I had placed this question in some other forums, however failed
togarner sufficient information till date. Presenting the same
herehoping to get some insightful ideas from experts here.
Typically in a Bond the Principal is constant over it's life.
HoweverI have come across a Bond whose principal is variable, say,
average ofS&P quote for the last one month and coupon is paid based
on that,coupon rate being constant. I was looking for some idea how
such bondcan be priced?
Any idea will be highly appreciated.
Thanks and regards,