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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 coupons on price

You have looked at how changing the yield to maturity of a bond has a big impact on its price. Changing the coupon, i.e., the amount of money the bond pays in each period, can also have an impact on the bond's price. This is what you are going to investigate now by comparing bonds with high and low coupons.

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