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you can view a bond as a floating rate note plus a swap from floating to fixed. Floating rate notes are always at par after coupon payments (ignoring credit risk...) so the pricing of a bond is the same as that of a swap. So the pricing of a callable bond is the same as that of a cancellable swap. A cancellable swap can be viewed as a swap minus the ...


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There was a pretty good article covering this in Wilmott Magazine a while back. It covered the somewhat more general case of Callable Constant Maturity Swap Steepeners. You can ignore all the machinery around the CMS coupons if you are just treating standard callable bonds. That is to say, in Equation 8, you just need to set the multiplier $m$ to zero. ...


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That's queer that you found nothing. Perhaps this project will be helpful. Let me know if you have questions about it.


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It is useful in risk reports because it tells a trader the interest rate risk of each bond in his portfolio. It is true that it is based on an infinitessimal yield curve bump but the difference between this and 1 basis point bump is usually very small and is considered negligible by many. Note that more sophisticated traders do also calculate the dollar ...


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The FRA A FRA is an agreement to exchange cash flows; the FRA in question is: Start 15/9/14 End 15/5/15 which is 242 days. USD Money Market quoting is Actual/360, so the accrual factor here is 242/360 = 0.6722. The FRA cashflows, therefore, are: on 15/9/14, Fix pays $\$1m * (0.6722 * 0.05) = \$33,611.11$, and Float pays $\$1m * (0.6722 * L)$, where L ...


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First, it's not a 8% loan. The .08 interest on 1.6 is 5%. It appears that it is coming from the $A (1) = 105$.



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