I have below Bond -
Issue date : 1/1/2020 Principal 1,000 Coupon : 8% pa Frequency : Semi-annual Tenor: 2 years
This Bond has 2 specific characteristics -
- At the maturity NO principal will be paid
- After 1st year, Bond can be exited on 6/1/2021 (i.e. Put option attached)
Without the 2nd condition, this Bond can easily be priced using
discounted CF method. However given that the 2nd option, how can I price this Bond?
Is there any software implementation to price this type of
Modified based on StackG's comment
StackG pointed a lack of clarity on the payment upon premature exit, So I added the payoff profile of this bond as below -
- At the maturity principal will be paid based on the prevailing one month average of S&P index + last coupon
- After 1st year, Bond can be exited on 6/1/2021 (i.e. Put option attached). In that case, the prevailing one month average of S&P index as on 6/1/2021 will be paid + accrued coupon
How can I price this Putable Bond?
Your pointer will be highly appreciated.
Thanks for your time.