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  3. Bond Valuation and Analysis in Python
  • 1

    Time Value of Money

    Free

    In this chapter, you’ll cover simple and compound interest, compounding frequencies, future value as well as commonly used financial functions in the NumPy-financial package.

  • 2

    Bond Prices & Yields

    Let’s get fiscal. You’ll discover how to find the price of both zero-coupon and coupon-paying bonds, as well as examining the relationship between bond prices and bond yields.

  • 3

    Duration

    Now it’s time for you to explore interest rate risk via the concept of duration, the factors affecting duration, and how to use duration to predict the price changes of a bond or hedge bond portfolios.

  • 4

    Convexity

    In the final chapter, you’ll be introduced to convexity. You’ll see how it helps address the weaknesses inherent in duration, examine the factors affecting convexity, and use both duration and convexity together to better predict bond prices.

Initializing

Exercise

Impact of bond yields on price

In the financial markets, interest rates are constantly changing, and these changes will influence bond prices as the interest rate you use to discount the cash-flows of the bond (the yield) changes.

To get a better feel for how the prices of bonds behave with respect to yields, you will price a bond using a set yield to maturity, then price the same bond using both a higher and lower yield to maturity and see how this affects the bond price.

numpy_financial has already been imported for you as npf.

Instructions 1/3

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  • 1
    • Find the price of a 10 year bond with a face value of USD 100, annual coupon of 3%, yield of 4%, and print the result.
  • 2
    • Find the price of a 10 year bond with a face value of USD 100, annual coupon of 3%, yield of 3%, and print the result.
  • 3
    • Find the price of a 10 year bond with a face value of USD 100, annual coupon of 3%, yield of 5%, and print the result.