Bond Pricing and Yields

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

[1] Golub, B.W. and L.M. Tilman, Risk Management: Approaches for Fixed Income Markets Wiley, 2000.

[2] Martellini, L., P. Priaulet, and S. Priaulet Fixed Income Securities Wiley, 2003.

[3] 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.

[4] Tuckman, B. Fixed Income Securities: Tools for Today's Markets Wiley, 2002.

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.

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