Bond markets: Structures and Yield Calculations / Patrick J. Brown → Обява 23876506

Bond markets: Structures and Yield Calculations / Patrick J. Brown

CONTENTS

Preface v

Acknowledgements vi

Chapter 1 Introduction 1

Chapter 2 Trade, Value and Settlement Dates 2

Chapter 3 Accrued Interest 5

1 Counting days accrued 5

2 Days in the year 9

3.3. Accrued interest computation 12

Chapter 4 Measures of Life and Associated Calculations 13

4.1 Life to maturity 14

4.2 Life to next call 14

4.3 Life to put 15

4.4 Average life 15

4.5 Equivalent life 16

4.6 Duration 17

4.7 Modified duration or volatility 20

4.8 Convexity 21

Chapter 5 Yields 23

5.1 Current yield 23

5.2 Simple yield to maturity 24

5.3 Redemption yields 25

5.3.1 Fixed coupon bonds 27

5.3.2 Money market yields 30

(bonds in their last coupon period)

5.3.3 Zero coupon bonds 33

3 Undated securities 34 Bonds with sinking funds 35

(yields to average/equivalent life)

4 Other bond types 37

5 Other redemption yields 38

Chapter 6 Floating Rate Note Calculations 40

4.9 Simple margin 40

4.10 Discounted margin 42

4.11 Yields 44

Chapter 7 Convertible Calculations 47

5.4 Conversion premium/discount - ratio 47

5.5 Income differential and break-even period 49

Chapter 8 Warrants 51

5.3.4 Bond warrants 51

5.3.5 Equity warrants 53

5.3.6 Commodity/currency warrants 54

Chapter 9 Money Market Instruments 56

9.1 Discounts 56

9.2 Yields 58

9.2.1 With one coupon payment 58

9.2.2 With more than one coupon payment 59

9.3 Floating rate certificates of deposit 60

Chapter 10 Miscellaneous 61

10.1 Bonds in default 61

10.2 Tax 61

10.3 Prices from yields 62

Chapter 11 Bond Market Comparisons 65

11.1 Table headings 72

11.2 Footnotes 76

Appendix I

The General Redemption Yield Formula 89

Appendix II

Compounding Frequency Adjustments 92

Appendix III

Index-Linked Stocks and Real Returns 94

***

As



cross-market bond trading has increased, it has become vital for



international participants to understand the many different features



that characterize the various international bond markets. Of particular



interest to bond traders and investors are such factors as calculation"



of prices, accrued interest, yields, and durations.

Bond Markets compares and contrasts all major bond markets with particular attention to:

• how different instruments are normally quoted

• how much accrued interest is payable by the buyer in addition to traded price

• the cost of a bond if quoted on a yield basis

• normal settlement periods

• rules for adjusting coupon rates

• how yields are quoted and calculated.

Patrick



J. Brown has worked in the capital markets for over thirty years.



Currently he is a Director of the International Securities Market



Association (ISMA). He has been a member of the UK and European Bond



Commissions for a number of years and was involved in developing the



original EFFAS indices. He is the author of Constructing and Calculating



Bond Indices.

GPCo

1261 West Glenlake Chicago, Illinois 60660

Fitzroy Dearborn Publishers

***

PREFACE

The



increase in cross market bond trading, makes it very important that



participants understand the differences between market practices and as a



result can compare returns on a consistent basis.

Due, at least in



part, to the G30 recommendations, the advent of the Euro and increased



cross-border investment, bond market practices and yield conventions are



tending to converge. However, it can be seen that there is still a long



way to go.

The purpose of this book is to define and compare the



standard methods and conventions used in the International and many



domestic bond markets for calculating prices, accrued interest, yields,



durations etc. The comparison concentrates on the European bond markets,



but it does include some of the other major markets.

The book



incorporates, updates and extends the information contained in the ISMA



Formulae for Yield and Other Calculations book (now out of print) and



that in the Bond Markets Mechanics chapter of the 6th Edition of the



European Bond Markets book.

Patrick Brown London

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