On Wed, 2010-03-03 at 09:41 +0100, Ferdinando Ametrano wrote:
> On Tue, Mar 2, 2010 at 9:21 PM, Nathan Abbott <
[hidden email]> wrote:
> > the user wants the NPV of the bond to be the amount
> > purchased * clean price / 100.
>
> and you know what... he's simply right
Is he? So if I'm holding a bond, the fraction of the current coupon
that I have already accrued is not part of its value?
> The current engine does calculate the dirty price
> (results_.settlementValue) and some "npv" (results_.value) of
> questionable usefulness. My reservation about the current npv are:
> 1) it does include cashflows before or on bond settlement date, which
> in most situation do not belong to the npv
That's on purpose. settlementValue() and NPV() answer two different
questions. The first is "how much money am I going to make if I sell
this bond?" The second is "how much money am I going to receive if I
keep this bond until its maturity?" I'd say they're both legitimate,
even if questionably useful :) I can see that one might want to have
one or the other as the instrument NPV---or neither, as Nathan's user
wants to exclude the accrued amount.
(While we discuss which is more sensible, a simple solution for Nathan
might be to wrap the bond, i.e., write a simple instrument that takes a
Bond instance and whose NPV is calculated from the bond as the amount
purchased * clean price / 100.)
> 2) is valid for an holding amount of faceAmount (typically 100)
>
> > I am thinking the best way to solve this
> > problem is to create another pricing engine for the bond that calculates the
> > NPV of the bond to equal the amount purchased * the clean price / 100.
>
> the real issue in not the engine, but the current lack for the
> "holding amount" piece of info
> I would put it in the Bond class since it inherits from Instrument and
> so it should be homogeneous to other Instruments in portfolio
> evaluation.
I'm not sure I get it. Wouldn't it be the same as putting in a Stock
class the number of stocks held? If we're modeling an instrument
(singular) how many we have is an external information. No?
Later,
Luigi
--
The wisdom of the wise and the experience of the ages are perpetuated
by quotations.
-- Benjamin Disraeli
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