Re: FixedCouponBond pricing wrong?

Posted by Luigi Ballabio on
URL: http://quantlib.414.s1.nabble.com/FixedCouponBond-pricing-wrong-tp3741p3748.html

On 04/22/05 01:09:04, Feng Ning wrote:
>
> See the test_suite/bonds.cpp, testCachedYield() function.
> For bond1, the marketPrice1=99.203125.
> However, my caculation on scratch paper shows the price
> p = c*(u+u^2+u^3+u^4) + 1*u^4 = 98.41
> where c = 0.025, u =1/(1+y/2)

What figures did you put into your calculation? The formula is correct (and  
the calendar and day counter used in testCachedYield are consistent with  
it,) but I get
c = 0.025/2 = 0.0125
y = 0.02925
u = 1/(1+y/2) = 0.98559
p = c*(u+u^2+u^3+u^4) + 1*u^4 = 99.18  (not 98.41)

There's still a difference, but it is due to the fact that your formula  
gives you the price at the issue date. The test calculates the bond price  
on November 22nd, 2004---22 days after. The difference is the discount  
factor between the two dates. If one edits the test and writes
Date today(30,October,2004);
the result is consistent with the formula.

Later,
        Luigi

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