en>Rich Farmbrough: General fixes. using AWB

2010-09-27T12:01:19Z

General fixes. using AWB

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'''Par yield''' (or par rate) denotes in finance, the coupon rate for which the price of a bond is equal to its [[nominal value]] (or [[par value]]).<ref>[http://www.cass.city.ac.uk/faculty/g.questa/files/Book7.pdf G. Questa: Fixed income analysis for the global financial market Chapter 7 Section 4;]</ref> It is used in the design of fixed interest securities and in constructing [[interest rate swap]]s.

The par yield ''c'' for a n-year maturity fixed bond satisfies the following equation<ref>Martellini, Priaulet, Priaulet: Fixed-income securities, Wiley Finance, 2003</ref>

<math>
\frac{100 c}{1 + R(0,1)} + \frac{100 c}{(1 + R(0,2))^2} + \cdots + \frac{100 + 100c}{(1+R(0,n))^n } = 100.
</math>

This can be more succinctly expressed with the prices of zero coupon bonds:

<math>
c=\frac{1-P_n}{\sum_{k=1}^nP_k}
</math>

Here <math>R(0,m)</math> denotes the yield (on annual interest rate basis) of an <math>m</math>-year [[zero-coupon bond]], and <math>P_m</math> denotes the price of an <math>m</math>-year ZCB.

==See also==

{{Empty section|date=January 2014}}

==References==
{{Reflist}}

[[Category:Credit]]

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en>Rich Farmbrough: General fixes. using AWB