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Finance[FloatingRateBond] - create new floating-rate bond

Calling Sequence

FloatingRateBond(redemptionvalue, maturity, timeunit, rate, spreads, options)

FloatingRateBond(redemptionvalue, maturitydate, rate, spreads, options)

Parameters

redemptionvalue

-

bonds redemption value

maturitydate

-

a date specified in a format recognized by the ParseDate command; maturity date

maturity

-

a nonnegative integer specifying the quantity of the time units

timeunit

-

Days, Weeks, Months, or Years; time units

rate

-

benchmark rate data structure; variable rate

spreads

-

a list or Vector of the spreads on the interest rate

opts

-

(optional) equation(s) of the form option = value where option is one of calendar, convention, frequency, daycounter, issuedate, or settlementdays; specify options for the FloatingRateBond command

Description

• 

The FloatingRateBond commands creates a new floating-rate bond with the specified parameters. It is assumed that the face value of the bond is 100.0.

Examples

withFinance:

SetEvaluationDateJanuary 15, 2007:

Settingsdaycounter=Historical,businessdayconvention=Unadjusted,settlementdays=0

daycounter=Historical,businessdayconvention=Unadjusted,settlementdays=0

(1)

rate:=BenchmarkRate0.03

rate:=moduleend module

(2)

LoadHistoryrate,December 23, 2006,0.023,0.025,0.021,0.022,0.023,0.02,0.021,0.024,0.025,0.026,0.027,0.028

spreads:=0.001,0.0012,0.0014,0.0016

spreads:=0.0010.00120.00140.0016

(3)

bond:=FloatingRateBond100,5,Years,rate,spreads,issuedate=January 02, 2007:

Get the set of cash flows for your bonds.

CashFlowsbond

2.699979789 on 'January 2, 2008',3.120146310 on 'January 2, 2009',3.140123291 on 'January 2, 2010',3.160123291 on 'January 2, 2011',3.160099636 on 'January 2, 2012',100. on 'January 2, 2012'

(4)

Calculate the clean price and the dirty price for your bond using the fixed rate of 5% as the discount rate.

cleanprice:=CleanPricebond,0.05

cleanprice:=91.08881737

(5)

dirtyprice:=DirtyPricebond,0.05

dirtyprice:=91.18498176

(6)

accrued:=AccruedAmountbond

accrued:=0.09616438356

(7)

Calculate the bond's yield using the previous discount rate.

YieldFromCleanPricebond,cleanprice

0.05000000002

(8)

YieldFromDirtyPricebond,dirtyprice

0.04999999999

(9)

Note that the face value is always 100.0 and the coupon payments are calculated based on this rate.

bond2:=FloatingRateBond120,5,Years,rate,spreads,issuedate=January 02, 2007:

Get the set of cash flows for your bonds.

CashFlowsbond2

2.699979789 on 'January 2, 2008',3.120146310 on 'January 2, 2009',3.140123291 on 'January 2, 2010',3.160123291 on 'January 2, 2011',3.160099636 on 'January 2, 2012',120. on 'January 2, 2012'

(10)

See Also

Finance[CleanPrice], Finance[DirtyPrice], Finance[FixedCouponBond], Finance[YieldFromCleanPrice], Finance[YieldFromDirtyPrice], Finance[ZeroCouponBond]

References

  

Brigo, D., Mercurio, F., Interest Rate Models: Theory and Practice. New York: Springer-Verlag, 2001.

  

Glasserman, P., Monte Carlo Methods in Financial Engineering. New York: Springer-Verlag, 2004.

  

Hull, J., Options, Futures, and Other Derivatives, 5th. edition. Upper Saddle River, New Jersey: Prentice Hall, 2003.


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