Superseding Newton with a superior bond yield algorithm

Christopher Deeley

Superseding Newton with a superior bond yield algorithm

Christopher Deeley

Research output: Book chapter/Published conference paper › Conference paper › peer-review

Abstract

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 language	English
Title of host publication	Current Global Financial Crisis and its impact on New Capital Flows into the Asia-Pacific
Publisher	Australian School of Business: University of NSW
ISBN (Electronic)	9780980476514
Publication status	Published - 2008
Event	Australasian Finance and Banking Conference (AFBC) - Shangri-La Hotel in Sydney, Australia Duration: 16 Dec 2008 → 18 Dec 2008

Conference

Conference	Australasian Finance and Banking Conference (AFBC)
Country/Territory	Australia
Period	16/12/08 → 18/12/08

Cite this

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title = "Superseding Newton with a superior bond yield algorithm",

abstract = "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",

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N2 - 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

AB - 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

KW - Bond yield

KW - Newton's Method

M3 - Conference paper

BT - Current Global Financial Crisis and its impact on New Capital Flows into the Asia-Pacific

PB - Australian School of Business: University of NSW

T2 - Australasian Finance and Banking Conference (AFBC)

Y2 - 16 December 2008 through 18 December 2008

ER -

Superseding Newton with a superior bond yield algorithm

Abstract

Conference

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Cite this