Hi Christofer! If you?re trying to price that specific bond, you could use different items, but here are a few I use (work in finance, submitting application for CFA charter this month) 1. Trying to see how it ?should be? priced versus the market?s price - use the yield curve that it is priced in (L+550bps) + the spread across each payment date. 2. How it?s priced relative to similar securities - I would use an OAS spread over a risk free Rate of the same (or similar) maturity - use can use interpolation to create synthetic yield curves based on a longer and shorter one.
On Friday, July 3, 2020, <r-sig-finance-request at r-project.org> wrote:
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https://stat.ethz.ch/mailman/listinfo/r-sig-finance or, via email, send a message with subject or body 'help' to r-sig-finance-request at r-project.org You can reach the person managing the list at r-sig-finance-owner at r-project.org When replying, please edit your Subject line so it is more specific than "Re: Contents of R-SIG-Finance digest..." Today's Topics: 1. Applicable discount rate for coupon paying bond (Christofer Bogaso) ---------------------------------------------------------------------- Message: 1 Date: Fri, 3 Jul 2020 04:14:11 +0530 From: Christofer Bogaso <bogaso.christofer at gmail.com> To: r-sig-finance at r-project.org Subject: [R-SIG-Finance] Applicable discount rate for coupon paying bond Message-ID: <CA+dpOJmgnax_UJJqWY1HyshvJQSEBSsNOROKvUOuNN jwD9eoiA at mail.gmail.com> Content-Type: text/plain; charset="utf-8" Hi, I have a small question on pricing a coupon paying bond. Let say, I have a coupon paying bond issued by a top rated Govt bank in UK. Coupon is payable semi-annually. To price the bond what discount rate should be applied for each future coupon and principal payment? Should I use term structure of LIBOR? or LIBID? Or average of both? Or something else? Any pointer will be appreciated. Thanks, ------------------------------ Subject: Digest Footer _______________________________________________ R-SIG-Finance mailing list R-SIG-Finance at r-project.org https://stat.ethz.ch/mailman/listinfo/r-sig-finance ------------------------------ End of R-SIG-Finance Digest, Vol 194, Issue 1 *********************************************
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