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The fair price of a "straight bond" (a bond with no embedded options; see Bond (finance) § Features) is usually determined by discounting its expected cash flows at the appropriate discount rate. Although this present value relationship reflects the theoretical approach to determining the value of a bond, in practice its price is (usually ...
The Frankfurt Bond Market, 1988. A bond index or bond market index is a method of measuring the investment performance and characteristics of the bond market.There are numerous indices of differing construction that are designed to measure the aggregate bond market and its various sectors (government, municipal, corporate, etc.)
The observed prices serve as valuation benchmarks. From the prices, one calculates price multiples such as the price-to-earnings or price-to-book ratios—one or more of which used to value the firm. For example, the average price-to-earnings multiple of the guideline companies is applied to the subject firm's earnings to estimate its value.
The calculation of bond prices due to the change in time to maturity can also be easily figured based on some relatively simple math, giving investors a clear idea of a bond’s expected price.
Bond prices and interest rates are closely related and can both be used to forecast economic activity, so investors should at least be aware of the basics: how interest rates affect bond prices ...
Calculating option prices, and their "Greeks", i.e. sensitivities, combines: (i) a model of the underlying price behavior, or "process" - i.e. the asset pricing model selected, with its parameters having been calibrated to observed prices; and (ii) a mathematical method which returns the premium (or sensitivity) as the expected value of option ...
Higher prevailing interest rates make the price of bonds fall, while lower rates increase the price of bonds. And the longer the bond’s maturity, the more affected it is by changes in rates.
The standard broker valuation formula (incorporated in the Price function in Excel or any financial calculator, such as the HP10bII) confirms this; the main term calculates the actual (dirty price), which is the total cash exchanged, less a second term which represents the amount of accrued interest.