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Fixed Income - Accrued Interest
According to the text book, when you calculate the present value of the future cashflows so as to arrive at the full-price (dirty price) that the buyer has to pay, you have to raise (1+discount rate) to the power of (fraction of time from settlement to next coupon payment). That means this is done on a continuously compounded basis isn't it?
But on the other hand, the accrued interest = coupon rate times x (1 - fraction of time from settlement to next coupon payment). It seems to me that this is done on a simple basis.
One is continuously compounded, one is simple. Isn't this inconsistent?
I sense that I'm missing something here. Any ideas anyone?
Edited 1 time(s). Last edit at Monday, October 26, 2009 at 12:46AM by pamarro251. |
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发表于 2011-7-13 16:32
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