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Bond Immunization

Today's Date
Days in Year

10/11/2012
365

Bond Quotes
Maturity Date

2/15/2013
2/15/2013
8/15/2013
8/15/2013
2/15/2014
2/15/2014
8/15/2014
8/15/2014
2/15/2015
2/15/2015
8/15/2015
8/15/2015
2/15/2016
2/15/2016
8/15/2016
8/15/2016
2/15/2017
2/15/2017

Coupon Rate

(%)
4.625%
0.875%
4.375%
1.750%
3.875%
1.375%
4.250%
0.750%
4.000%
1.875%
4.250%
0.500%
4.000%
2.375%
4.250%
1.250%
4.500%
2.125%

Ask Price

x/32
101
100
103
101
105
101
107
100
108
103
110
100
111
106
113
102
115
105

22
4
20
8
18
18
16
17
18
12
21
1
15
9
23
19
13
9

Decimal
0.6875
0.125
0.625
0.25
0.5625
0.5625
0.5
0.53125
0.5625
0.375
0.65625
0.03125
0.46875
0.28125
0.71875
0.59375
0.40625
0.28125

Price with
Accrued
Interest

$ 102.74
$ 100.32
$ 104.84
$
$
$
$
$
$

101.65
106.48
101.87
108.52
100.70
109.53

$ 103.81
$ 111.71
$ 100.14
$ 112.47
$ 106.85
$ 114.80
$ 102.88
$ 116.57
$ 105.78

mmunization
Inputs

Minimize

Outputs

Constraints Intermediate Results

Term Structure
Coefficients

a0
a1
a2
a3

-0.014884

Decision Variables

55.5
309.5

Sum of Squared
Error

0,19

-0.082833
0,143699
-0.127119

Zero Coupon Bonds with Face Value $100

Maturity
Price of Zero
Date
2/15/2013 100.90625
8/15/2013
102.4375
2/15/2014
103.5625
8/15/2014 104.015625
2/15/2015 105.96875
8/15/2015 105.34375
2/15/2016
108.875
8/15/2016 108.15625
2/15/2017 110.34375

Time to
Maturity

Spot Rate

127

1.740%

308

0.802%

492

0.282%

673

0.544%

857

0.587%

1038

0.627%

1222

0.669%

1404

0.728%

1588

1.035%

Poly
Derived
Spot
Rates

Todays date
Days in Year
Last coupon

10-Nov-12
365
15-Aug-12

Bond Quates
Maturity date
15-Feb-13
15-Feb-13
15-Aug-13
15-Aug-13
15-Feb-14
15-Feb-14
15-Aug-14
15-Aug-14
15-Feb-15
15-Feb-15
15-Aug-15
15-Aug-15
15-Feb-16
15-Feb-16
15-Aug-16
15-Aug-16
15-Feb-17
15-Feb-17

Coupon Rate
in %
4.625
0.875
4.375
1.75
3.875
1.375
4.25
0.75
4
1.875
4.25
0.5
4
2.375
4.25
1.25
4.5
2.125

Ask Price
x/32
101
100
103
101
105
101
107
100
108
103
110
100
111
106
113
102
115
105

22
4
20
8
18
18
16
17
18
12
21
1
15
9
23
19
13
9

decimal
0.6875
0.125
0.625
0.25
0.5625
0.5625
0.5
0.53125
0.5625
0.375
0.65625
0.03125
0.46875
0.28125
0.71875
0.59375
0.40625
0.28125

clean
dirty
101.6875
102.79
100.125
100.33
103.625
104.67
101.25
101.67
105.5625
106.49
101.5625
101.89
107.5
108.51
100.5313
100.71
108.5625
109.52
103.375
103.82
110.6563
111.67
100.0313
100.15
111.4688
112.42
106.2813
106.85
113.7188
114.73
102.5938
102.89
115.4063
116.48
105.2813
105.79

0.02
15-Feb-13
15-Aug-13
15-Feb-14
15-Aug-14
15-Feb-15
15-Aug-15
15-Feb-16
15-Aug-16
15-Feb-17

1.74%
0.80%
0.28%
0.54%
0.59%
0.63%
0.67%
0.73%
1.03%

0.018

0.0174

0.016
0.014
0.012
0.01
0.008

0.0080

0.006

0.0054

0.004
0.002
0

0.0028

0.0059

2.31%
1.17%
1.74%
15-Feb-13

0.80%

0.28%

0.54%

0.59%

15-Aug-13

15-Feb-14

15-Aug-14

15-Feb-15

0.27
0.76
0.00 102.3125
0.00 100.4375
0.00 1.53125 101.5313

1.27

1.76

2.27

15-Aug-13

TtM
in years
101.69
0.27
100.13
0.27
102.44
0.76

15-Feb-14

103.56

1.27

0.00

1.3125

15-Aug-14

104.02

1.76

0.00

1.25

1.25

1.25

15-Feb-15

105.97

2.27

0.00

1.46875

1.46875

1.46875

15-Aug-15

105.34

2.76

0.00

1.1875

1.1875

1.1875

1.1875

1.1875

15-Feb-16

108.88

3.27

0.00

1.59375

1.59375

1.59375

1.59375

1.59375

15-Aug-16

108.16

3.76

0.00

1.375

1.375

1.375

1.375

1.375

15-Feb-17

110.34

4.27

0.00

1.65625

1.65625

1.65625

1.65625

1.65625

Maturity date
15-Feb-13

0.0103
0.0073
0.0059

0.0063

0.0067

1.3125 101.3125
101.25
1.46875 101.4688

0.63%

0.67%

0.73%

1.03%

15-Aug-15

15-Feb-16

15-Aug-16

15-Feb-17

2.76

3.27

3.76

4.27

101.1875
1.59375 101.5938
1.375

1.375

1.65625

1.65625

101.375
1.65625 101.6563

Cash Matching

Cash Matching

Cash matching w/
reinvestment at
zero rate

Cash matching with


reinvestment (poly
spot rates)

Maturity
Coupon
Dirty Price
Portfolio
Portfolio
102.74
101.08
19.26
2/15/2013 0.04625 $
$
100.32
98.71
18.81
2/15/2013 0.00875
$
104.84
101.39
19.32
8/15/2013 0.04375
101.65
98.5
18.77
8/15/2013 0.01750 $
106.48
100.24
19.1
2/15/2014 0.03875 $
101.87
95.9
18.27
2/15/2014 0.01375 $
108.52
96.87
18.46
8/15/2014 0.04250 $
100.70
89.89
17.13
8/15/2014 0.00750 $
109.53
88.7
16.9 <=====
2/15/2015 0.04000 $
103.81
84.07
16.02
2/15/2015 0.01875 $
111.71
77.3
14.73
8/15/2015 0.04250 $
100.14
69.3
13.2
8/15/2015 0.00500 $
112.47
61.66
11.75
2/15/2016 0.04000 $
106.85
58.58
11.16
2/15/2016 0.02375 $
114.80
46
8.76
8/15/2016 0.04250 $
102.88
41.23
7.85
8/15/2016 0.01250 $
116.57
31.9
31.9
2/15/2017 0.04500 $
$
105.78
28.95
5.51
2/15/2017 0.02125
Total Cost
144452.0749
30532.5588 <=====
CF from
CF from Portfolio
Portfolio
Obligation
Date
2/15/2013
10000
<
9800.21
9961.94
8/15/2013
5000
<
4800.11
4961.92
2/15/2014
40000
<
39803.86
39962.63
8/15/2014
7000
<
6813.24
6964.42
2/15/2015
80000
<
79827.23
79967.08 <=====
8/15/2015
12000
<
11853.41
11972.07
2/15/2016
50000
<
49879.76
49977.09
8/15/2016
6000
<
5912.77
5983.38
2/15/2017
15000
<
14939.16
14962.59

Inputs
Minimize
Outputs Constraints
Decision Variables
Intermediate Results

Decision Variables

Objective Function (Minimize)

Cash Flow Constraints

Function (Minimize)

w Constraints

Duration Front End


Duration Optimization
Inputs
Minimize
Outputs
Constraints
Decision Variables
Intermediate Results
Date
Obligation
2/15/2013
10000
8/15/2013
5000
2/15/2014
40000
8/15/2014
7000
2/15/2015
80000
8/15/2015
12000
2/15/2016
50000
8/15/2016
6000
2/15/2017
15000

Constraints

======>

Maturity
Coupon
Dirty Price
2/15/2013
0.04625 $
102.74
2/15/2013
0.00875 $
100.32
8/15/2013
0.04375 $
104.84
8/15/2013
0.0175 $
101.65
2/15/2014
0.03875 $
106.48
2/15/2014
0.01375 $
101.87
8/15/2014
0.0425 $
108.52
8/15/2014
0.0075 $
100.70
2/15/2015
0.04 $
109.53
2/15/2015
0.01875 $
103.81
8/15/2015
0.0425 $
111.71
8/15/2015
0.005 $
100.14
2/15/2016
0.04 $
112.47
2/15/2016
0.02375 $
106.85
8/15/2016
0.0425 $
114.80
8/15/2016
0.0125 $
102.88
2/15/2017
0.045 $
116.57
2/15/2017
0.02125 $
105.78
Objective
Constraint
PV
dPV/da0
dPV/da1
dPV/da2
dPV/da3
dPV/da4

Portfolio

=
=
=
=
=
=
=

Portfolio
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Obligation

Results Table
a0
a0-a1
a0-a2
a0-a3
a0-a4
Maturity
Coupon
Dirty Price Portfolio
Portfolio Portfolio Portfolio Portfolio
2/15/2013 0.04625 $ 102.74
100.24
67
89
84
134
2/15/2013 0.00875 $ 100.32
110
198
666
235
154
8/15/2013 0.04375 $ 104.84
198
345
198
124
123
8/15/2013
0.0175 $ 101.65
167
123
456
198
198
2/15/2014 0.03875 $ 106.48
196
345
745
134
102
2/15/2014 0.01375 $ 101.87
123
555
110
110
109
8/15/2014
0.0425 $ 108.52
122
110
474
134
104
8/15/2014
0.0075 $ 100.70
122
55
234
143
143
2/15/2015
0.04 $ 109.53
123
110
198
153
102
2/15/2015 0.01875 $ 103.81
145
466
234
123
107
8/15/2015
0.0425 $ 111.71
145
337
234
134
107
8/15/2015
0.005 $ 100.14
345
545
234
110
102
2/15/2016
0.04 $ 112.47
244
77
224
133
109
2/15/2016 0.02375 $ 106.85
227
435
110
102
102
8/15/2016
0.0425 $ 114.80
156
355
244
104
106
8/15/2016
0.0125 $ 102.88
245
110
567
105
110
2/15/2017
0.045 $ 116.57
244
355
456
103
101
2/15/2017 0.02125 $ 105.78
244
456
234
102
102
Objective