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A closed-form formula for pricing bonds between coupon payments

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  • Sylvia Gottschalk

Abstract

We derive a closed-form formula for computing bond prices between coupon payments. Our results cover both the `Treasury' and the `Street' pricing methods used by sovereign and corporate issuers. We apply our formulas to two UK gilts, the 8% Treasury Gilt 2015, and the 0.5% Treasury Gilt 2022, and show that we can obtain the dirty price of these bonds at any date with a minimum of calculations, and without intensive computational resources.

Suggested Citation

  • Sylvia Gottschalk, 2018. "A closed-form formula for pricing bonds between coupon payments," Papers 1801.06028, arXiv.org, revised Apr 2018.
    • Handle: RePEc:arx:papers:1801.06028
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    File URL: http://arxiv.org/pdf/1801.06028
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