An Overview of Bond Pricing Models and Duration of Bonds

DOI

10.2991/aebmr.k.220307.378How to use a DOI?

Keywords

Bond pricing model; duration; corporate bond; convertible bond; zero-coupon bond; yield to maturity (YTM)

Abstract

This paper presents and compares different bond pricing models, points out whether these models work well and if there are any limitations of these models, this paper concludes models for corporate bonds, convertible bonds, and zero-coupon bonds. Besides, this paper introduces Macaulay duration and Modified duration, evaluates how duration could affect the bond’s sensitivity to interest rates, and the usefulness of duration in the bond pricing process. Considering bonds are such an important element of the capital markets, investors and analysts would like to know how the many characteristics of a bond combine to determine its intrinsic value. The value of a bond, like the value of a stock, decides whether it is a good investment for a portfolio and is thus an important stage in bond investing. Calculating the present value of a bond’s estimated future coupon payments is what bond valuation is all about. The premise of using this article is under the International Financial Reporting Standards (IFRS).

Copyright

© 2022 The Authors. Published by Atlantis Press International B.V.

Open Access

This is an open access article under the CC BY-NC license.

Download article (PDF)

TY  - CONF
AU  - Jieyi Chen
PY  - 2022
DA  - 2022/03/26
TI  - An Overview of Bond Pricing Models and Duration of Bonds
BT  - Proceedings of the 2022 7th International Conference on Financial Innovation and Economic Development (ICFIED 2022)
PB  - Atlantis Press
SP  - 2316
EP  - 2320
SN  - 2352-5428
UR  - https://doi.org/10.2991/aebmr.k.220307.378
DO  - 10.2991/aebmr.k.220307.378
ID  - Chen2022
ER  -