Valuation and Management of Bonds

This Demonstration should never be used for trading nor hedging securities: it develops an idea for resolving issues surrounding duration. Shared prices are not the "clean prices" used by bond traders. The model assumes vanilla bonds with a flat term structure of interest rates. Several functions are plotted together for comparison: place the cursor over each plot for a tooltip description. The coupon payment frequency and the compounding basis are set equal to reduce the number of controls. The interest table on the summary tab may be used to work with alternative nominal interest rate bases.

THINGS TO TRY

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Contributed by: Charles N. Bagley (University of Massachusetts at Amherst)

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