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I know that some of the bonds on the market have been manipulated by investment funds. I could identify these bonds. I have classified similar bonds in terms of risk, maturity and Duration. I have calculated YTM for all bonds. Next, I would like to estimate their real value these bonds using the bond index. My problem is I don't know how to make an index for each category and calculate the YTM index. To understand more accurately: My papers are divided into 30 categories according to the features. And, for example, in the first batch there are 2 manipulated bonds and 25 similar ones and not manipulated. I want to make index using 25 bonds' YTM that could represent these value these 2 bonds. But I don't know how to make this index better? i have 25 bonds. i calculate YTM for each them. now i don't know how i can make a index for in 25 bonds.

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  • $\begingroup$ Can you clarify? $\endgroup$ – JoshK Aug 30 '19 at 1:01
  • $\begingroup$ i have 25 bonds. i calculate YTM for each them. now i don't know how i can make a index for in 25 bonds. $\endgroup$ – Amir Saleki Aug 30 '19 at 5:40
  • $\begingroup$ You could weigh them by amount outstanding in a single currency. The sum would give you your index yield (to worst ideally). $\endgroup$ – oronimbus Aug 30 '19 at 22:34
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To calculate the average YTM of the index, you need to use the duration-adjusted market value weight ($mv_{wd}$) for any bond $i$:

$$mv_{wd;i} = \frac{mv_i \cdot d_i}{\sum_{i=1}^n mv_i \cdot d_i}$$

, where $d_i$ denotes the duration of a bond $i$ and $mv_i$ the market value.

The average index YTM, $Ind_{YTM}$, is than calculated by:

$$Ind_{YTM} = \sum_{i = 1}^n mv_{wd;i} \cdot YTM_i$$

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