Posted by
Pascal Haakmat on
URL: http://quantlib.414.s1.nabble.com/Floating-bond-NPV-tp16164.html
Hi,
I had a question about floating bond valuation in QuantLib, which
differs from what I would expect according to Hull.
Hull has it that a floating bond equals nominal right after the next
coupon payment.
Therefore the NPV of a floating bond is given by:
npv = discount_factor * (nominal + coupon)
where
coupon = nominal * last fixing rate
discount_factor = discount on next coupon date
Clearly the NPV of a floating bond can never exceed nominal + coupon.
Yet when I define a floating bond from 1-Jan-2014 through 1-Jan-2018
with nominal 5.000.000, with semi-annual coupons, a last fixing of
0.004, and evaluate it on 1-Mar-2014, QuantLib yields a NPV of
5.068.363. This is much larger than nominal + coupon (5.011.178). How to
explain/justify this (large) difference?
Kind regards,
Pascal
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