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Why is accrued interest prorated linearly?

Cashflows from coupons and principal are discounted using the YTM to get PV of the bond in dirty price. as shown here in this question Misunderstanding of 'day counts' and accrued interest ...
user72290's user avatar
2 votes
1 answer
927 views

Does the rolling of bond payments from non-business days to the next or previous business day affect the calculation of accrued interest and YTM?

(1) Does the rolling of bond payment from non-business days to the next or previous business day affect the coupon payment and the accrued interests within the coupon period? In other words, are the <...
Rodolfo Oviedo's user avatar
2 votes
1 answer
90 views

How to calculate accrued interest for a reverse floater?

I was looking at an example from my lecture notes regarding a reverse floater. We have the following data (We use the Act/365 convention): Nominal value: 1000 EUR Maturity: 14.04.2026 Coupon: 4,5% ...
julian2000P's user avatar
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1 answer
787 views

Negative Accrued for treasury bonds?

I am looking at some spreadsheets that show the US treasury bonds have some negative accrued. Why would that be the case? Shouldn't bond accruals always be positive?
Taylor Fang's user avatar
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Why do we get a higher yield when we pay the interest at the end?(bonds)

I have an example where I show that if you pay the tax at the end of the bond period, the yield after tax is higher, but I am wondering if it is possible to give an explanation as to why it is like ...
user394334's user avatar
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0 answers
222 views

Incorporate Transaction Date to Price Fixed Rate Bond using Quantlib Python

I am trying to use QuantLib Python to price a fixed rate bond, based on the following data: Issue date is 28 September 2017 (issueDate), maturity date is 28 ...
ql.user2511's user avatar
1 vote
0 answers
336 views

How to backtest with fixed-income instruments

I'm running a backtest with the 5-yr and the 30-yr treasury bills going back to 1990, both with a weighting of 25%. How do I use their daily yields to adjust the portfolio through time? I've thought ...
Thomas Hegarty's user avatar
1 vote
3 answers
934 views

Day count methods and actual coupon payments

Assume I have a bond that pays 5% coupon anually on the last day of the year. The day count method used to calculate accrued interest over time is "days actual / 360". The day before the ...
GrafZ4hl's user avatar
4 votes
1 answer
841 views

Accrued interest calculation for floaters linked to O/N rates (such as SOFR)

It is known that between 2021 and 2022, LIBOR rates will cease to exist. Therefore bond issuers started to link their newly issued floaters to O/N rates based on actual trades such as SOFR for USD or €...
Martin Vesely's user avatar
4 votes
3 answers
2k views

Misunderstanding of 'day counts' and accrued interest

I'm totally new to the fixed income world. My goal with this question is to gain an understanding how interest is accrued day-by-day for a particular instrument. This will obviously be done by an app ...
Yippie McSmashmouth's user avatar
2 votes
0 answers
461 views

Difference in utility of cap/floor and FRA

What is the difference in utility for cap/floor and FRA? To me their function looks very similar. Are they used for different objectives. One thing I know in difference is that the pay off for cap is ...
Rejath Johny's user avatar
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1 answer
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Daily accruals - when does it accrue?

Is there a convention on when interest should be accruing? That is, does interest on a bond accrue during the business day, or does it accrue overnight? Are you able to point me in the direction of a ...
user42003's user avatar
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1 answer
529 views

Why is the number of accrued days equal to one on coupon dates for NL/365?

Accrued day should be zero on coupon dates. This is true for all day count conventions. However, I found that Bloomberg returns 1 accrued day on coupon dates only for NL/365 day count. Bond example: ...
Dejan's user avatar
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2 answers
365 views

Australian Treasury Bonds - Price Calculation with Accrual

In this document ASX Interest Rate Derivatives (on page 7) the Australian Commonwealth Treasury Bond (paying semi-anually) is valued as $$ P = v^{f/d} \cdot \left(\frac{c}{2} + \frac{c}{2}\cdot\sum_{...
Phil-ZXX's user avatar
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-1 votes
1 answer
181 views

On the buyside, when people quote a 'price' for a plain vanilla interest rate swap, does it include accrued interest?

The valuation date falls in between coupon payment days on the swap, does the 'price' of a swap understood to include the accrued interest (interest from the previous payment date to the valuation ...
user34468's user avatar
0 votes
1 answer
310 views

Accrued Interest on a bond [closed]

If I were to price a bond on one of its coupon payment days, does that day's coupon payment gets added to the cashflows, if so, do we just discount that by 1 (same day)? ie, C1*df1 + C2*df2 + ... ...
user34462's user avatar
3 votes
0 answers
4k views

How to Calculate Accrued Interest on a Floating Rate Note

I'm trying to manually calculate the accrued interest of a U.S. Treasury floating rate note (FRN). I believe the formula is: (# of days / 360) x 1,000,000 x coupon If this formula is correct, ...
equanimity's user avatar
1 vote
1 answer
530 views

Day count convention Actual/Actual AFB; Factor for Date1 = 2004-02-28 and Date2 = 2008-02-28

The Actual/Actual AFB day count convention is explained on Wikipedia here. I'll condense the rules here the way I understood them. Factor = Days(Date1,Date2)/DiY If 29th february is in date ...
TT.'s user avatar
  • 121
6 votes
2 answers
4k views

BUS/252 accrual - why 252?

I've recently found out about the BUS/252 accrual method used in Brazil, where, to calculate how much of the yearly accrual falls on a given period by calculating the number of business days during ...
jacek_wi's user avatar
  • 163
6 votes
2 answers
14k views

What happens to accrued interest and coupon payment if coupon date is weekend?

Say a 5% bond using 30/360 convention, 2 coupons per year. Last coupon payment was on 2016-04-01. Now 2016-10-01 is weekend and the coupon is paid on 2016-10-03. Is this coupon 2.5 or slightly more ...
jf328's user avatar
  • 183
3 votes
2 answers
259 views

How do we include inflation in our calculations? [closed]

How do we include inflation in our compound interest calculations? E.g. if we have current principal of 1000$ and the interest rate is 3% after 10 years we have <...
Jim's user avatar
  • 131
3 votes
3 answers
356 views

Accrued Interest in Monte Carlo simulation for CVA/DVA computation

I'm implementing the CVA/DVA for some interest rates derivatives, with the short rate following a Hull-White model (one factor). Once I have calibrated the model and I get the results with the ...
SciPhy's user avatar
  • 111
0 votes
0 answers
582 views

Dirty price of US T bill

I need to calculate the dirty price of a US T bond given the below details: Assume the coupons on a U.S. Treasury bond are paid on January 1st and July 1st. The bond has a par of $1,000 and pays a ...
AfterWorkGuinness's user avatar