Superseding Newton with a superior bond yield algorithm

Christopher Deeley

    Research output: Book chapter/Published conference paperConference paperpeer-review


    Determining the yield to maturity of a coupon bond with more than four coupon periods is a two-step process. The first step uses an approximation formula to obtain a first approximation of the true yield. The second step uses an algorithm to advance the first approximation closer to the bond's true yield. Newton's Method is the algorithm used in applications such as Microsoft's Excel "YIELD" function. This paper evaluates some commonly used approximation formulae before demonstrating a solution algorithm that generally outperforms Newton's Method
    Original languageEnglish
    Title of host publicationCurrent Global Financial Crisis and its impact on New Capital Flows into the Asia-Pacific
    PublisherAustralian School of Business: University of NSW
    ISBN (Electronic)9780980476514
    Publication statusPublished - 2008
    EventAustralasian Finance and Banking Conference (AFBC) - Shangri-La Hotel in Sydney, Australia
    Duration: 16 Dec 200818 Dec 2008


    ConferenceAustralasian Finance and Banking Conference (AFBC)


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