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  • Fixed Income Arbitrage

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    Kaushik Nath
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    The document summarizes the cash flows and net present value (NPV) calculation for two US treasury bonds: a 4.25% semi-annual coupon bond and a 10.625% semi-annual coupon bond. It shows the bond characteristics including coupon rate, cash flows on coupon payment dates, discount factors, present values of cash flows, and NPV calculations for each bond over a 10 year period. The duration and modified duration are also reported for each bond.

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    The document summarizes the cash flows and net present value (NPV) calculation for two US treasury bonds: a 4.25% semi-annual coupon bond and a 10.625% semi-annual coupon bond. It shows the bond characteristics including coupon rate, cash flows on coupon payment dates, discount factors, present values of cash flows, and NPV calculations for each bond over a 10 year period. The duration and modified duration are also reported for each bond.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    20 views5 pages

    Fixed Income Arbitrage

    Uploaded by

    Kaushik Nath
    The document summarizes the cash flows and net present value (NPV) calculation for two US treasury bonds: a 4.25% semi-annual coupon bond and a 10.625% semi-annual coupon bond. It shows the bond characteristics including coupon rate, cash flows on coupon payment dates, discount factors, present values of cash flows, and NPV calculations for each bond over a 10 year period. The duration and modified duration are also reported for each bond.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 5

    4.

    25% Semi-annual coupon US treasury bond


    Number of
    days from
    last
    coupon
    Cumulative
    Date
    payment Number of days CF
    DF
    PV
    Years
    11/4/2008
    0
    0 -104.7813
    1 -104.7813
    0
    2/15/2009
    104
    104 1.210959 0.99029 1.199201 0.284932
    8/15/2009
    181
    285 2.107534 0.973616 2.05193 0.780822
    2/15/2010
    184
    469 2.142466 0.956954 2.050241 1.284932
    8/15/2010
    181
    650 2.107534 0.940841 1.982855 1.780822
    2/15/2011
    184
    834 2.142466 0.924739 1.981222 2.284932
    8/15/2011
    181
    1015 2.107534 0.909169 1.916104 2.780822
    2/15/2012
    184
    1199 2.142466 0.893609 1.914527 3.284932
    8/15/2012
    181
    1380 2.107534 0.878563 1.851601 3.780822
    2/15/2013
    184
    1564 2.142466 0.863527 1.850077 4.284932
    8/15/2013
    181
    1745 2.107534 0.848987 1.78927 4.780822
    2/15/2014
    184
    1929 2.142466 0.834458 1.787797 5.284932
    8/15/2014
    181
    2110 2.107534 0.820407 1.729037 5.780822
    2/15/2015
    184
    2294 2.142466 0.806367 1.727613 6.284932
    8/15/2015
    181
    2475 102.1075 0.792789 80.94978 6.780822
    NPV
    2E-006

    bond

    10.625

    Duration

    Modified
    duration

    5.9833566975 5.7819352852

    Number of
    days from
    last coupon
    Date
    payment
    11/4/2008
    0
    2/15/2009
    104
    8/15/2009
    181
    2/15/2010
    184
    8/15/2010
    181
    2/15/2011
    184
    8/15/2011
    181
    2/15/2012
    184
    8/15/2012
    181
    2/15/2013
    184
    8/15/2013
    181
    2/15/2014
    184
    8/15/2014
    181
    2/15/2015
    184
    8/15/2015
    181

    10.625% Semi-annual coupon US treasury bond

    Cumulative
    Number of
    days
    0
    104
    285
    469
    650
    834
    1015
    1199
    1380
    1564
    1745
    1929
    2110
    2294
    2475

    CF
    DF
    PV
    Years
    Duration
    -140.0938
    1 -140.0938
    0
    3.027397 0.989187 2.994663 0.284932
    5.268836 0.970648 5.114182 0.780822
    5.356164 0.952156 5.099907 1.284932
    5.268836 0.934311 4.922729 1.780822
    5.356164 0.916512 4.908988 2.284932
    5.268836 0.899334 4.738443 2.780822
    5.356164 0.882201 4.725216 3.284932 5.3032124184
    5.268836 0.865667 4.561056 3.780822
    5.356164 0.849176 4.548324 4.284932
    5.268836 0.83326 4.390309 4.780822
    5.356164 0.817386 4.378054 5.284932
    5.268836 0.802066 4.225955 5.780822
    5.356164 0.786787 4.214158 6.284932
    105.2688 0.77204 81.27177 6.780822
    NPV
    4E-006

    Modified
    duration

    5.1046826207

    Discount rate
    for zero NPV of
    4.25% bond

    Discount rate
    for zero NPV
    of 10.625%
    3.484% bond

    Yield spread

    0.406%

    3.889%

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