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Bond valuation - Relative price approach | A Wisdom Archive on Bond valuation - Relative price approach | | Bond valuation - Relative price approach A selection of articles related to Bond valuation - Relative price approach | |
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Bond valuation, Bond valuation - Arbitrage free pricing approach, Bond valuation - Bond pricing, Bond valuation - Coupon yield, Bond valuation - Current yield, Bond valuation - General relationships, Bond valuation - Relative price approach, Bond valuation - The present value relationship, Bond valuation - Yield to Maturity, Bond duration, Bond convexity
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ARTICLES RELATED TO Bond valuation - Relative price approach | | | |  Bond valuation - Relative price approach: Encyclopedia II - Bond valuation - General relationships
Bond valuation - The present value relationship.
The fair price of a straight bond (a bond with no embedded option) is determined by discounting the expected cash flows:
Cash flows:
the periodic coupon payments C, each of which is made every t periods;
the par or face value F, which is payable at maturity of the bond after T periods.
Discount rate: the required (annually compounded) yield or rate of return r.
r is the market interest rate for new bond issues with similar risk rati ...
See also:Bond valuation, Bond valuation - General relationships, Bond valuation - The present value relationship, Bond valuation - Coupon yield, Bond valuation - Current yield, Bond valuation - Yield to Maturity, Bond valuation - Bond pricing, Bond valuation - Relative price approach, Bond valuation - Arbitrage free pricing approach Read more here: » Bond valuation: Encyclopedia II - Bond valuation - General relationships |
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| | | | Bond valuation - Relative price approach: Encyclopedia II - Bond valuation - Bond pricing
Bond valuation - Relative price approach.
Here the bond will be priced relative to a benchmark, usually a government security. The discount rate used to value the bond is determined based on the bond's rating relative to a government security with similar maturity. The better the quality of the bond, the smaller the spread between its required return and the YTM of the benchmark. This required return is then used to discount the bond cash flows as above.
Bond valu ...
See also:Bond valuation, Bond valuation - General relationships, Bond valuation - The present value relationship, Bond valuation - Coupon yield, Bond valuation - Current yield, Bond valuation - Yield to Maturity, Bond valuation - Bond pricing, Bond valuation - Relative price approach, Bond valuation - Arbitrage free pricing approach Read more here: » Bond valuation: Encyclopedia II - Bond valuation - Bond pricing |
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