Re: [Quantlib-dev] Bond redemption, face value and amortising bonds

[Simon I. <Sim...@st...>]

Hmmm, interesting point. I'd guess that an asset swap on an amortising
bond swaps only the interest payments, not the notional repayments.
Bloomberg doesn't help either - it simply ignores the sinking fund in
ASW. Can anyone confirm this?

I will - of course - make sure it passes the current QuantLib tests.

Simon

-----Original Message-----
From: fer...@gm...
[mailto:fer...@gm...] On Behalf Of Ferdinando Ametrano
Sent: 25 February 2008 18:19
To: Simon Ibbotson
Subject: Re: [Quantlib-dev] Bond redemption, face value and amortising
bonds

Hi Simon

your proposal makes sense to me, my only warning being to pay
attention to (not mess up) asset swap. I'm not sure what is the asset
swap mechanics for amortizing bonds

You might find that in some place cashflows are assumed to be sorted,
in other place they aren't. E.g. the redemption is assumed to be the
last cashflow.
Would be nice to settle this issue

ciao -- Nando

On Mon, Feb 25, 2008 at 6:43 PM, Simon Ibbotson
<Sim...@st...> wrote:
>
>
>
>
> Toyin (and all others interested),
>
>
>
> I want to implement amortising bonds within QuantLib. I think this
should be
> part of the base Bond class, as all the functions in the base class
use the
> face amount and the redemption in calculations of yield. Before I do,
can I
> clarify the usage of certain terms?
>
>
>
> To clarify:
>
> The face amount is the listed bond notional - used with the rate to
> calculate the cashflow for a given period. The redemption(s) are
usually
> termed the notional repayment schedule and the (redemption value)/100
*
> (initial face amount) is the associated payment.
>
> The bond quoting convention for the dirty price is (Settlement
Payment) =
> (Current Bond Notional) * (Dirty Price) / 100.
>
> The clean price is (Clean Price) = (Dirty Price) - Accrued, where the
> Accrued is based upon a notional of 100.
>
> Anyone disagree?
>
>
>
> Note that the redemption value on any given date usually (but not
always)
> equals the change in the bond notional.
>
>
>
> This would mean making the redemption and face value into vectors (in
the
> constructor, similar to the rate) and the faceAmount() function into
> faceAmount(const Date&). Any objections, comments?
>
>
>
> Cheers,
>
> Simon
>
>
>
>
>
> Simon Ibbotson
>
> Head of Quantitative Analytics
>
> Capital Markets
>
> Straumur
>
>
>
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