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2

Your loan seems to be one that would be either called by the bank or closed by the borrower as soon as the coupon rate moves below or above the prevailing market rate, so for the loan to be outstanding there needs to be some transaction cost or friction to keep it around. For that reason it is most similar to US mortgages which can be prepaid, but where ...


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Let’s say the fair coupon on the 2010 coupon paying bond is C. Then this bond is worth 100. Its cash flows in 2007,2008,2009,2010 are respectively C,C,C, (100+C) and we can use the discount factors in the OP to calculate the present value as follows: $$ PV = 0.9553C +0.9107 C+ 0.8620C+ 0.8108(100+C)$$. Equating this to 100 and solving, we find C to be 5....


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The yield on a discount (zero-coupon) bond maturing in 2010 should be higher than that of a coupon bond maturing in 2010 under the stated circumstances. This is because some of the cash flow of the coupon bond will be realized earlier than that of the discount bond, and as shown in the table below, the yield curve, as far as these two bonds are concerned, is ...


3

Amortization is included when you build the bond. Given that you're mentioning a payment of 300, I'll guess that your face amount is 1000, not 100 as you wrote. Also, you're mentioning a payment on 30.04.2018, but your schedule starts on 02.12.2019. For the purpose of the example, I'll start the schedule earlier so it includes both payments. So, let's say ...


2

Many countries issue sovereign debt denominated in EUR. The common (but not universal) methodology is to treat only German sovereign debt as credit risk free, and all other countries as credit-risky. Italy is one of the PIIGS, but French or (non-EU) Romanian debt is credit-risky too. They're similar to corporate bonds. The "z" in "z-spread&...


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I built something like you attempted here to estimate yield curves for various sectors using Bbg bond quotes years ago in VBA. For the calibration of the parameters I used Nelder Mead. It doesn't need the first and second derivative or estimators of it such as Newton-Ralphson and such.


4

When we worked with that model several years go, we used Differential Evolution and it worked very well. See Calibrating the Nelson-Siegel-Svensson Model. At least in the standard version, a best-of-many gradient searches (with random initial values) also worked well. See A Note on 'Good Starting Values' in Numerical Optimisation. If you were willing to use ...


1

In the U.S., the U.K., and most (but not all!) other markets, the convention is: the daycount isn't used to calculate how much bond coupon is paid. Rather, it is exactly 1/frequency of the indicated coupon rate per annum, even though the coupon period might be 181 or 182 actual days. (In contrast, fixed coupons are daycounted for loans (and loan ...


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This is a very deep and interesting question. Actually I think the answer depends on the cashflows for your asset and how they will be reinvested. For example, if your asset is held for 10 years but will be returned to you at one lump sum with all the principal and interest at the end of the 10 years, then a different benchmark rate should be used than an ...


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