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The underlying asset is a single consumer price index (CPI). It is zero-coupon because there is only one cash flow at the maturity of the swap, without any intermediate coupon. It is called a swap because at maturity, one counterparty pays a fixed amount to the other in exchange for a floating amount (in this case linked to inflation). The ...
"Trees" are widely applied here. Other common pricing-methods are simulation and PDEs.. Option-adjusted spread (OAS) is the yield spread which has to be added to a benchmark yield curve to discount a security's payments to match its market price, using a dynamic pricing model that accounts for embedded options.
Tree-based bond option valuation: 0. Construct an interest-rate tree, which, as described in the text, will be consistent with the current term structure of interest rates. 1. Construct a corresponding tree of bond-prices, where the underlying bond is valued at each node by "backwards induction":
The value of a paper savings bond can be checked by using the savings bond calculator on the TreasuryDirect website and entering this ... Issue price. Total Interest. Value. $100. October 1994 ...
The Z-spread of a bond is the number of basis points (bp, or 0.01%) that one needs to add to the Treasury yield curve (or technically to Treasury forward rates) so that the Net present value of the bond cash flows (using the adjusted yield curve) equals the market price of the bond (including accrued interest). The spread is calculated iteratively.
Bond Calculator. Online calculation of interest and rate indicators with different day count conventions, created by SIX Swiss Exchange . Pricing of Game Options (in a market with stochastic interest rates) - Section Chapter II: A Little Bit of Finance, Section 1: Brief introduction to Financial Securities, from pages 26 to 33, formally mention ...
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The standard broker valuation formula (incorporated in the Price function in Excel or any financial calculator, such as the HP10bII) confirms this; the main term calculates the actual (dirty price), which is the total cash exchanged, less a second term which represents the amount of accrued interest.