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bndprice

Price fixed-income security from yield to maturity

In R2017b, the specification of optional input arguments has changed. While the previous ordered inputs syntax is still supported, it may no longer be supported in a future release. Use the optional name-value pair inputs: Period, Basis, EndMonthRule, IssueDate,FirstCouponDate, LastCouponDate, StartDate,Face, CompoundingFrequency, DiscountBasis, and LastCouponInterest.

Syntax

[Price,AccruedInt] = bndprice(Yield,CouponRate,Settle,Maturity)
[Price,AccruedInt] = bndprice(___,Name,Value)

Description

example

[Price,AccruedInt] = bndprice(Yield,CouponRate,Settle,Maturity) given bonds with SIA date parameters and yields to maturity, returns the clean prices and accrued interest due.

example

[Price,AccruedInt] = bndprice(___,Name,Value) adds optional name-value pair arguments.

Examples

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This example shows how to price a treasury bond at three different yield values.

Yield = [0.04; 0.05; 0.06]; 
CouponRate = 0.05; 
Settle = '20-Jan-1997'; 
Maturity = '15-Jun-2002'; 
Period = 2; 
Basis = 0; 

[Price, AccruedInt] = bndprice(Yield, CouponRate, Settle,...
Maturity, Period, Basis)
Price = 

  104.8106
   99.9951
   95.4384

AccruedInt = 

    0.4945
    0.4945
    0.4945

This example shows how to use datetime inputs to price a treasury bond at three different yield values.

Yield = [0.04; 0.05; 0.06];
CouponRate = 0.05;
Settle = datetime('20-Jan-1997','Locale','en_US');
Maturity = datetime('15-Jun-2002','Locale','en_US');
Period = 2;
Basis = 0;
[Price, AccruedInt] = bndprice(Yield, CouponRate, Settle,...
Maturity, Period, Basis)
Price = 

  104.8106
   99.9951
   95.4384

AccruedInt = 

    0.4945
    0.4945
    0.4945

This example shows how to price a Treasury bond at two different yield values that include parameter/value pairs for CompoundingFrequency, DiscountBasis, and LastCouponPeriodInterest.

bndprice(.04,0.08,'5/25/2004','4/21/2005','Period',1,'Basis',8, ...
'LastCouponInterest','simple')
ans = 103.4743

Input Arguments

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Bond yield to maturity is specified as a scalar or a NUMBONDS-by-1 or 1-by-NUMBONDS vector. Yield is on a semiannual basis for Basis values 0 through 7 and 13 and an annual basis for Basis values 8 through 12.

Data Types: double

Annual percentage rate used to determine the coupons payable on a bond, specified as decimal using a scalar or a NUMBONDS-by-1 or 1-by-NUMBONDS vector.

Data Types: double

Settlement date of the bond, specified as a scalar or a NUMBONDS-by-1 or 1-by-NUMBONDS vector using serial date numbers, date character vectors, or datetime arrays. The Settle date must be before the Maturity date.

Data Types: double | char | datetime

Maturity date of the bond, specified as a scalar or a NUMBONDS-by-1 or 1-by-NUMBONDS vector using serial date numbers, date character vectors, or datetime arrays.

Data Types: double | char | datetime

Name-Value Pair Arguments

Specify optional comma-separated pairs of Name,Value arguments. Name is the argument name and Value is the corresponding value. Name must appear inside single quotes (' '). You can specify several name and value pair arguments in any order as Name1,Value1,...,NameN,ValueN.

Example: [Price,AccruedInt] = bndprice(Yield,CouponRate,Settle,Maturity, 'Period',4,'Basis',9)

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Number of coupon payments per year, specified as scalar or a NUMBONDS-by-1 or 1-by-NUMBONDS vector using the values: 0, 1, 2, 3, 4, 6, or 12.

Data Types: double

Day-count of the instrument, specified as scalar or a NUMBONDS-by-1 or 1-by-NUMBONDS vector using a supported value:

  • 0 = actual/actual

  • 1 = 30/360 (SIA)

  • 2 = actual/360

  • 3 = actual/365

  • 4 = 30/360 (PSA)

  • 5 = 30/360 (ISDA)

  • 6 = 30/360 (European)

  • 7 = actual/365 (Japanese)

  • 8 = actual/actual (ICMA)

  • 9 = actual/360 (ICMA)

  • 10 = actual/365 (ICMA)

  • 11 = 30/360E (ICMA)

  • 12 = actual/365 (ISDA)

  • 13 = BUS/252

For more information, see basis.

Data Types: double

End-of-month rule flag, specified as a scalar or a NUMBONDS-by-1 or 1-by-NUMBONDS vector. This rule applies only when Maturity is an end-of-month date for a month having 30 or fewer days.

  • 0 = Ignore rule, meaning that a bond coupon payment date is always the same numerical day of the month.

  • 1 = Set rule on, meaning that a bond coupon payment date is always the last actual day of the month.

Data Types: logical

Bond Issue date, specified as a scalar or a NUMBONDS-by-1 or 1-by-NUMBONDS vector using serial date numbers, date character vectors, or datetime arrays.

If you do not specify an IssueDate, the cash flow payment dates are determined from other inputs.

Data Types: double | char | datetime

Irregular or normal first coupon date, specified as a scalar or a NUMBONDS-by-1 or 1-by-NUMBONDS vector using serial date numbers, date character vectors, or datetime arrays.

If you do not specify a FirstCouponDate, the cash flow payment dates are determined from other inputs.

Data Types: double | char | datetime

Irregular or normal last coupon date, specified as a scalar or a NUMBONDS-by-1 or 1-by-NUMBONDS vector using serial date numbers, date character vectors, or datetime arrays.

If you do not specify a LastCouponDate, the cash flow payment dates are determined from other inputs.

Data Types: double | char | datetime

Forward starting date of payments, specified as a scalar or a NUMBONDS-by-1 or 1-by-NUMBONDS vector using serial date numbers, date character vectors, or datetime arrays.

If you do not specify a StartDate, the effective start date is the Settle date.

Data Types: double | char | datetime

Face value of the bond, specified as a scalar or a NUMBONDS-by-1 or 1-by-NUMBONDS vector.

Data Types: double

Compounding frequency for yield calculation, specified as a scalar or a NUMBONDS-by-1 or 1-by-NUMBONDS vector.

  • 1 — Annual compounding

  • 2 — Semiannual compounding

  • 3 — Compounding three times per year

  • 4 — Quarterly compounding

  • 6 — Bimonthly compounding

  • 12 — Monthly compounding

Note

By default, SIA bases (0-7) and BUS/252 use a semiannual compounding convention and ICMA bases (8-12) use an annual compounding convention.

Data Types: double

Basis used to compute the discount factors for computing the yield, specified as a scalar or a NUMBONDS-by-1 or 1-by-NUMBONDS vector. Values are:

  • 0 = actual/actual

  • 1 = 30/360 (SIA)

  • 2 = actual/360

  • 3 = actual/365

  • 4 = 30/360 (PSA)

  • 5 = 30/360 (ISDA)

  • 6 = 30/360 (European)

  • 7 = actual/365 (Japanese)

  • 8 = actual/actual (ICMA)

  • 9 = actual/360 (ICMA)

  • 10 = actual/365 (ICMA)

  • 11 = 30/360E (ICMA)

  • 12 = actual/365 (ISDA)

  • 13 = BUS/252

For more information, see basis.

Note

If a SIA day-count basis is defined in the Basis input argument and there is no value assigned for DiscountBasis, the default behavior is for SIA bases to use the actual/actual day count to compute discount factors.

If an ICMA day-count basis or BUS/252 is defined in the Basis input argument and there is no value assigned for DiscountBasis, the specified bases from the Basis input argument are used.

Data Types: double

Compounding convention for computing the yield of a bond in the last coupon period, specified as a scalar or a NUMBONDS-by-1 or 1-by-NUMBONDS vector. LastCouponInterest is based on only the last coupon and the face value to be repaid. Acceptable values are:

  • simple

  • compound

Data Types: char | cell

Output Arguments

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Clean price of bond, returned as a NUMBONDS-by-1 vector. The dirty price of the bond is the clean price plus the accrued interest. It equals the present value of the bond cash flows of the yield to maturity with semiannual compounding.

accrued interest payable at settlement, returned as a NUMBONDS-by-1 vector.

More About

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Price and Yield Conventions

The Price and Yield are related to different formulae for SIA and ICMA conventions.

For SIA conventions, Price and Yield are related by the formula:

 Price + Accrued Interest = sum(Cash_Flow*(1+Yield/2)^(-Time)) 
where the sum is over the bond's cash flows and corresponding times in units of semiannual coupon periods.

For ICMA conventions, the Price and Yield are related by the formula:

 Price + Accrued Interest = sum(Cash_Flow*(1+Yield)^(-Time))

Algorithms

For SIA conventions, the following formula defines bond price and yield:

PV=i=1n(CF(1+zf)TF),

where:

PV =

Present value of a cash flow.

CF =

Cash flow amount.

z =

Risk-adjusted annualized rate or yield corresponding to a given cash flow. The yield is quoted on a semiannual basis.

f =

Frequency of quotes for the yield. Default is 2 for Basis values 0 to 7 and 13 and 1 for Basis values 8 to 12. The default can be overridden by specifying the CompoundingFrequency name-value pair.

TF =

Time factor for a given cash flow. The time factor is computed using the compounding frequency and the discount basis. If these values are not specified, then the defaults are as follows: CompoundingFrequency default is 2 for Basis values 0 to 7 and 13 and 1 for Basis values 8 to 12. DiscountBasis is 0 for Basis values 0 to 7 and 13 and the input Basis for Basis values 8 to 12.

Note

The Basis is always used to compute accrued interest.

For ICMA conventions, the frequency of annual coupon payments determines bond price and yield.

References

[1] Krgin, D. Handbook of Global Fixed Income Calculations. Wiley, 2002.

[2] Mayle, J. "Standard Securities Calculations Methods: Fixed Income Securities Formulas for Analytic Measures." SIA, Vol 2, Jan 1994.

[3] Stigum, M., Robinson, F. Money Market and Bond Calculation. McGraw-Hill, 1996.

Introduced before R2006a

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