A closed-form formula for pricing bonds between coupon payments
Pricing of Securities
2018-04-17 v2
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.
Cite
@article{arxiv.1801.06028,
title = {A closed-form formula for pricing bonds between coupon payments},
author = {Sylvia Gottschalk},
journal= {arXiv preprint arXiv:1801.06028},
year = {2018}
}
Comments
revised version that corrects some typos, Mathematical Finance Letters (2018)