Fixed rate bond valuation in final coupon period using simple interest

Posted by igitur on Mar 29, 2017; 7:56am
URL: http://quantlib.414.s1.nabble.com/Fixed-rate-bond-valuation-in-final-coupon-period-using-simple-interest-tp18157.html

Hi all,

In the final coupon period (e.g. 2 months before redemption), our South African bonds work similar to the method described here: http://help.derivativepricing.com/1283.htm

I'll quote it too:

"In some markets (such as the US and Germany), bond yields during the final coupon period are calculated on a simple interest basis rather than using compound interest.  When only one payment is outstanding, the appropriate formula for bond price (PPH) is:

P = dirty price (clean price plus accrued interest) of the bond per 100 units face value.

ym = annual money market yield (simple interest)

c = annual percentage coupon rate

h = number of coupon periods in a year

d = number of days to redemption (using an "Actual" day count convention)

a = number of days in a year (using appropriate day count convention)

"

So in QuantLib, when I calculate a dirty price using FixedRateBond, is there a way that this is handled automatically? I suspect this is not the case and that I myself would have to check whether the bond is in the last coupon period and set the compounding to simple interest and leave other longer bonds to compounded interest. 

thanks

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