*Claus Munk*

- Published in print:
- 2011
- Published Online:
- September 2011
- ISBN:
- 9780199575084
- eISBN:
- 9780191728648
- Item type:
- chapter

- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199575084.003.0002
- Subject:
- Economics and Finance, Financial Economics

The clearest picture of the term structure of interest rates is obtained by looking at the yields of zero-coupon bonds of different maturities. However, in most countries almost all traded bonds are ...
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The clearest picture of the term structure of interest rates is obtained by looking at the yields of zero-coupon bonds of different maturities. However, in most countries almost all traded bonds are coupon bonds, not zero-coupon bonds. This chapter discusses methods to extract or estimate a zero-coupon yield curve from the prices of coupon bonds at a given point in time. In the U.S. and some other countries, zero-coupon bonds can be traded, but for various reasons most analysts and dealers prefer to work with a zero-coupon yield curve extracted from the prices of the coupon bonds. The methods discussed in the chapter are bootstrapping, cubic splines, and the Nelson–Siegel parameterization.Less

The clearest picture of the term structure of interest rates is obtained by looking at the yields of zero-coupon bonds of different maturities. However, in most countries almost all traded bonds are coupon bonds, not zero-coupon bonds. This chapter discusses methods to extract or estimate a zero-coupon yield curve from the prices of coupon bonds at a given point in time. In the U.S. and some other countries, zero-coupon bonds can be traded, but for various reasons most analysts and dealers prefer to work with a zero-coupon yield curve extracted from the prices of the coupon bonds. The methods discussed in the chapter are bootstrapping, cubic splines, and the Nelson–Siegel parameterization.

*Tomas Björk*

- Published in print:
- 2004
- Published Online:
- October 2005
- ISBN:
- 9780199271269
- eISBN:
- 9780191602849
- Item type:
- chapter

- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199271267.003.0020
- Subject:
- Economics and Finance, Financial Economics

This chapter examines the specific problems associated with the application of arbitrage theory to the bond market. It focuses on zero coupon bonds, also known as pure discount bonds, of various ...
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This chapter examines the specific problems associated with the application of arbitrage theory to the bond market. It focuses on zero coupon bonds, also known as pure discount bonds, of various maturities. Practice exercises are included.Less

This chapter examines the specific problems associated with the application of arbitrage theory to the bond market. It focuses on **zero coupon bonds**, also known as **pure discount bonds**, of various maturities. Practice exercises are included.

*Tomas Björk*

- Published in print:
- 2019
- Published Online:
- February 2020
- ISBN:
- 9780198851615
- eISBN:
- 9780191886218
- Item type:
- chapter

- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780198851615.003.0019
- Subject:
- Economics and Finance, Econometrics

In this chapter the reader is introduced to the basic concepts of interest rate theory. Starting with a market for zero coupon bonds we define the relevant interest rates such as the short rate, the ...
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In this chapter the reader is introduced to the basic concepts of interest rate theory. Starting with a market for zero coupon bonds we define the relevant interest rates such as the short rate, the spot rates, and the forward rates. There is an in-depth study of the relations between the dynamics of these rates, and we also discuss some more applied topics as fixed coupon bonds, floating rate bonds, yields, duration, and convexity.Less

In this chapter the reader is introduced to the basic concepts of interest rate theory. Starting with a market for zero coupon bonds we define the relevant interest rates such as the short rate, the spot rates, and the forward rates. There is an in-depth study of the relations between the dynamics of these rates, and we also discuss some more applied topics as fixed coupon bonds, floating rate bonds, yields, duration, and convexity.

*Tomas Björk*

- Published in print:
- 2004
- Published Online:
- October 2005
- ISBN:
- 9780199271269
- eISBN:
- 9780191602849
- Item type:
- chapter

- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199271267.003.0021
- Subject:
- Economics and Finance, Financial Economics

This chapter examines the problem of how to model an arbitrage free family of zero coupon bond price processes. It assumes a market for T-bonds for every choice of T, and that the market is arbitrage ...
More

This chapter examines the problem of how to model an arbitrage free family of zero coupon bond price processes. It assumes a market for T-bonds for every choice of T, and that the market is arbitrage free. For every T, the price of a T-bond has the form p (t, T) = F (t, r, (t) ; T), where F is a smooth function of three real variables. Practice exercises are included.Less

This chapter examines the problem of how to model an arbitrage free family of zero coupon bond price processes. It assumes a market for T-bonds for every choice of T, and that the market is arbitrage free. For every T, the price of a T-bond has the form p (t, T) = F (t, r, (t) ; T), where F is a smooth function of three real variables. Practice exercises are included.