A closed-form formula for pricing bonds between coupon payments

Sylvia Gottschalk

Abstract


We derive a closed-form formula for computing bond prices between coupon payments. Our results cover both the `Treasury' and the `Street' pricing methods used by sovereign and corporate issuers. We apply our formulas to two UK gilts, the 8% Treasury Gilt 2015, and the 0.5% Treasury Gilt 2022, and show that we can obtain the dirty price of these bonds at any date with a minimum of calculations, and without intensive computational resources.

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Published: 2018-05-11

How to Cite this Article:

Sylvia Gottschalk, A closed-form formula for pricing bonds between coupon payments, Mathematical Finance Letters, Vol 2018 (2018), Article ID 2

Copyright © 2018 Sylvia Gottschalk. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Mathematical Finance Letters

ISSN 2051-2929

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