Financial Toolbox™

Bond Pricing and Yields

The pricing and yield formulas for fixed-income securities come from:

[1] Mayle, Jan, Standard Securities Calculation Methods. New York: Securities Industry Association, Inc. Vol. 1, 3rd ed., 1993, ISBN 1-882936-01-9. Vol. 2, 1994, ISBN 1-882936-02-7.

In many cases these formulas compute the price of a security given yield, dates, rates, and other data. These formulas are nonlinear, however; so when solving for an independent variable within a formula, Financial Toolbox™ software uses Newton's method. See any elementary numerical methods textbook for the mathematics underlying Newton's method.

Bibliography

Term Structure of Interest Rates