WebCab Bonds for Delphi (COM)

CalculatingZeroRates.ZeroRateFromZeroBond Method 

Evaluates the continuously compounded zero rate implied from the market price of a zero coupon bond.

public double ZeroRateFromZeroBond(
   DateTime evaluationDate,
   DateTime maturityDate,
   double principleSum,
   double marketPrice,
   string businessCalendarName
);

Parameters

evaluationDate
The date when the zero rate of the bond is being evaluated.
maturityDate
The date when the bond matures.
principleSum
The principle sum of the bond (also known as the face value).
marketPrice
The market price of the bond.
businessCalendarName
The name of one of the implemented business calendars, "London" by default.

Remarks

Recall that a zero coupon bind is a bond which does not pay any coupons.

Remarks:

  1. This procedure can be applied to the construction of the zero rate curve (i.e. the zero rate against the maturity).
  2. Risk arbitrage will ensure that a class of interest rate assets which exhibit is similar risk profile will all have similar zero rate curves. Therefore, for classes of assets such a US Treasury bonds (i.e. all have zero risk of default) will all have zero rate which lie on the same zero curve.

See Also

CalculatingZeroRates Class | WebCab.COM.Finance.Bonds Namespace