com.webcab.ejb.finance.bonds
Interface TreasuryPrice

All Superinterfaces:

EJBObject, Remote

public interface TreasuryPrice

extends EJBObject

Within this Enterprise JavaBean we offer functionality related to the evaluation of the price and yield of a government backed bond (i.e. Treasury bond) issued in the local currency.

Method Summary

double	parYield(double principalSum, Date evaluationDate, Date maturityDate, boolean annualOrSemi, double maturityZero, Date[] paymentDates, double[] zeroCurveOnCouponPaymentDates, BusinessCalendar businessCalendar) We evaluate the Par Yield of a Treasury bond which pays annual or semi-annual coupons.
double	parYield(double principalSum, double maturity, boolean annualOrSemi, double maturityZero, double[] timeToCoupons, double[] zeroCurveOnCouponPaymentDates) We evaluate the Par Yield of a Treasury bond which pays annual or semi-annual coupons.
double	priceOfBond(double principleSum, Date evaluationDate, Date maturity, double zeroRateAtMaturity, double[] payments, Date[] paymentDates, double[] zeroRates, BusinessCalendar businessCalendar) Evaluates the price of a Treasury bond by discounting the cash flows until maturity in accordance with the corresponding continuously compounded zero rate.
double	priceOfBond(double principleSum, double time2Maturity, double zeroRateAtMaturity, double[] payments, double[] time2Payments, double[] zeroRates) Evaluates the price of a Treasury bond by discounting the cash flows until maturity in accordance with the corresponding continuously compounded zero rate.
double	tbondPrice(double principleSum, double riskFreeRate, Date evaluationDate, Date maturityDate, double[] coupons, Date[] dateOfCoupons, BusinessCalendar businessCalendar) Evaluates the price of a Treasury bond by discounting the future cash flows in accordance with the risk free interest rate.
double	tbondPrice(double principleSum, double riskFreeRate, double time2Maturity, double[] coupons, double[] time2Coupons) Evaluates the price of a Treasury bond by discounting the future cash flows in accordance with the risk free interest rate.
double	yieldToMaturity(double principalSum, double marketPrice, Date previousCouponDate, Date evaluationDate, Date settlementDate, Date[] paymentDates, Date maturityDate, double[] couponPayments, BusinessCalendar businessCalendar, String dayCountConvention) The yield to maturity (YTM) (also known as the internal rate of return) with continuous compounding is calculated for a traded bond.
double	yieldToMaturity(double principalSum, double marketPrice, double time2Maturity, double[] time2Payments, double[] couponPayments) The yield to maturity (YTM) (also known as the internal rate of return) with continuous compounding is calculated for a traded bond.
double	yieldToMaturityFromPrice(double price, double[] payments, Date evaluationDate, Date[] paymentDates, BusinessCalendar businessCalendar) Here the yield to maturity of a bond is derived from its price, payments and time of these payments.
double	yieldToMaturityFromPrice(double price, double[] payments, double[] time2Payments) Here the yield to maturity of a bond is derived from its price, payments and time of these payments.
double	zeroTBondPrice(double principle, double riskFreeRate, Date evaluationDate, Date maturityDate, BusinessCalendar businessCalendar) This method returns the price of a zero-coupon Treasury bond.
double	zeroTBondPrice(double principle, double riskFreeRate, double time2Maturity) This method returns the price of a zero-coupon Treasury bond.
double	zeroYieldToMaturity(double principalSum, double marketPrice, Date evaluationDate, Date maturityDate, BusinessCalendar businessCalendar) Evaluates the yield to maturity (YTM) (also known as the internal rate of return) of a zero coupon bond.
double	zeroYieldToMaturity(double principalSum, double marketPrice, double timeToMaturity) Evaluates the yield to maturity (YTM) (also known as the internal rate of return) of a zero coupon bond.

Methods inherited from interface javax.ejb.EJBObject

getEJBHome, getHandle, getPrimaryKey, isIdentical, remove

Method Detail

priceOfBond

public double priceOfBond(double principleSum,
                          Date evaluationDate,
                          Date maturity,
                          double zeroRateAtMaturity,
                          double[] payments,
                          Date[] paymentDates,
                          double[] zeroRates,
                          BusinessCalendar businessCalendar)
                   throws TreasuryPriceDemoException,
                          RemoteException

Evaluates the price of a Treasury bond by discounting the cash flows until maturity in accordance with the corresponding continuously compounded zero rate.

Parameters:

principleSum - the principle sum of the bond which will be repaid at maturity

zeroRateAtMaturity - the corresponding continuously compounded zero rate of the maturity

payments - an array of doubles where the first element represents the first payments from the bond, the second the second payment and so on.

zeroRates - an array where the first element is the zero rate on the first payment date and the second term is the zero rate on the second payment date and so on.

evaluationDate - the date on which the price of the bond is evaluated

maturity - the date on which the bond matures

paymentDates - an array of dates where the first element corresponds to the date of the first payment and the second element corresponds to the date of the second payment and so on.

businessCalendar - The instance of a BusinessCalendar interface implementation. Specify null to select the London business calendar.

TreasuryPriceDemoException

RemoteException

priceOfBond

public double priceOfBond(double principleSum,
                          double time2Maturity,
                          double zeroRateAtMaturity,
                          double[] payments,
                          double[] time2Payments,
                          double[] zeroRates)
                   throws TreasuryPriceDemoException,
                          RemoteException

Evaluates the price of a Treasury bond by discounting the cash flows until maturity in accordance with the corresponding continuously compounded zero rate.

Parameters:

principleSum - the principle sum of the bond which will be repaid at maturity

time2Maturity - the time in years until the bond matures

zeroRateAtMaturity - the corresponding continuously compounded zero rate of the maturity

payments - an array of doubles where the first element represents the first payments from the bond, the second the second payment and so on.

time2Payments - an array of doubles where the first element represents the time until the first payment is made, the second the time until the second payment is made and so on.

zeroRates - an array where the first element is the zero rate on the first payment date and the second term is the zero rate on the second payment date and so on.

TreasuryPriceDemoException

RemoteException

tbondPrice

public double tbondPrice(double principleSum,
                         double riskFreeRate,
                         Date evaluationDate,
                         Date maturityDate,
                         double[] coupons,
                         Date[] dateOfCoupons,
                         BusinessCalendar businessCalendar)
                  throws TreasuryPriceDemoException,
                         RemoteException

Evaluates the price of a Treasury bond by discounting the future cash flows in accordance with the risk free interest rate.

Parameters:

principleSum - the principle sum which will be repaid at expiry

riskFreeRate - the continuously compounded annual risk free interest rate expressed in decimal format

coupons - an array where the first term corresponds to the amount paid by the next coupon payment and the second term corresponds to the amount paid by the coupon payment after that and so on

evaluationDate - the date of the evaluation of the price of the government backed bond

maturityDate - the date when the bond matures

dateOfCoupons - an array of dates where the first element corresponds to the date of the next coupon payment and the second term corresponds to the second coupon payment and so on.

businessCalendar - The instance of a BusinessCalendar interface implementation. Specify null to select the London business calendar.

TreasuryPriceDemoException

RemoteException

tbondPrice

public double tbondPrice(double principleSum,
                         double riskFreeRate,
                         double time2Maturity,
                         double[] coupons,
                         double[] time2Coupons)
                  throws TreasuryPriceDemoException,
                         RemoteException

Evaluates the price of a Treasury bond by discounting the future cash flows in accordance with the risk free interest rate.

Parameters:

principleSum - the principle sum which will be repaid at expiry

riskFreeRate - the continuously compounded annual risk free interest rate expressed in decimal format

time2Maturity - the number of years until the bond matures expressed in decimal format

coupons - an array where the first term corresponds to the amount paid by the next coupon payment and the second term corresponds to the amount paid by the coupon payment after that and so on

time2Coupons - an array where the first term corresponds to the number of years until the first coupon payment and the second term corresponds to the number of years until the second payment is made and so on... Note that the number of years must be expressed in decimal format (i.e. 3 years 6 months = 3.5)

TreasuryPriceDemoException

RemoteException

zeroTBondPrice

public double zeroTBondPrice(double principle,
                             double riskFreeRate,
                             Date evaluationDate,
                             Date maturityDate,
                             BusinessCalendar businessCalendar)
                      throws TreasuryPriceDemoException,
                             RemoteException

This method returns the price of a zero-coupon Treasury bond.

Parameters:

principle - the amount which is repaid at maturity of the bond

riskFreeRate - the risk free interest rate in the local currency expressed in decimal format (i.e. 1 percent = 0.01)

evaluationDate - the date on which the bonds price is evaluated

maturityDate - the date on which the bond matures

businessCalendar - The instance of a BusinessCalendar interface implementation. Specify null to select the London business calendar.

TreasuryPriceDemoException

RemoteException

zeroTBondPrice

public double zeroTBondPrice(double principle,
                             double riskFreeRate,
                             double time2Maturity)
                      throws TreasuryPriceDemoException,
                             RemoteException

This method returns the price of a zero-coupon Treasury bond.

Parameters:

principle - the amount which is repaid at maturity of the bond

riskFreeRate - the risk free interest rate in the local currency expressed in decimal format (i.e. 1 percent = 0.01)

time2Maturity - the time in years (in decimal format) until the bond matures

TreasuryPriceDemoException

RemoteException

yieldToMaturity

public double yieldToMaturity(double principalSum,
                              double marketPrice,
                              Date previousCouponDate,
                              Date evaluationDate,
                              Date settlementDate,
                              Date[] paymentDates,
                              Date maturityDate,
                              double[] couponPayments,
                              BusinessCalendar businessCalendar,
                              String dayCountConvention)
                       throws TreasuryPriceDemoException,
                              RemoteException

The yield to maturity (YTM) (also known as the internal rate of return) with continuous compounding is calculated for a traded bond. Note that the bond may be of any corporate or treasury type.

Remark: This method uses the Newton-Raphson procedure and produces a result which is accurate to 10 decimal places.

Parameters:

principalSum - the principal sum which will be repaid at expiry

marketPrice - the market price of the bond

couponPayments - an array where the first term corresponds to the amount paid by the next coupon payment and the second term corresponds to the amount paid by the coupon payment after that and so on

previousCouponDate - the date of the last payment before the evaluation date, or the date of the issue of the bond. Set to the evaluation or settlement date if does not apply.

evaluationDate - the date on which the yield to maturity (YTM) is evaluated

settlementDate - the date when the contract is being fulfilled

maturityDate - the date on which the bond matures

paymentDates - an array of dates where the first term corresponds to the date of the first payment and the second term corresponds to the date of the second payment and so on.

businessCalendar - The instance of a BusinessCalendar interface implementation. Specify null to select the London business calendar.

dayCountConvention - A string constant identifying one of the implemented day count conventions in the DayCountConventions class. The default day count convention is `Actual/Actual', identified by the "A/A" string constant.

TreasuryPriceDemoException

RemoteException

yieldToMaturity

public double yieldToMaturity(double principalSum,
                              double marketPrice,
                              double time2Maturity,
                              double[] time2Payments,
                              double[] couponPayments)
                       throws TreasuryPriceDemoException,
                              RemoteException

The yield to maturity (YTM) (also known as the internal rate of return) with continuous compounding is calculated for a traded bond. Note that the bond may be of any corporate or treasury type.

Remark: This method uses the Newton-Raphson procedure and produces a result which is accurate to 10 decimal places.

Parameters:

principalSum - the principal sum which will be repaid at expiry

marketPrice - the market price of the bond

time2Maturity - the number of years until the bond matures expressed in decimal format

couponPayments - an array where the first term corresponds to the amount paid by the next coupon payment and the second term corresponds to the amount paid by the coupon payment after that and so on

time2Payments - an array where the first term corresponds to the number of years until the first coupon payment and the second term corresponds to the number of years until the second payment is made and so on... Note that the number of years must be expressed in decimal format.

TreasuryPriceDemoException

RemoteException

zeroYieldToMaturity

public double zeroYieldToMaturity(double principalSum,
                                  double marketPrice,
                                  Date evaluationDate,
                                  Date maturityDate,
                                  BusinessCalendar businessCalendar)
                           throws TreasuryPriceDemoException,
                                  RemoteException

Evaluates the yield to maturity (YTM) (also known as the internal rate of return) of a zero coupon bond. Note, that this method can be applied to all bonds (i.e. corporate and treasury)

Parameters:

principalSum - the principal sum which will be repaid at expiry

marketPrice - the present market price of the bond

evaluationDate - the date on which the yield to maturity (YTM) of the zero bond is evaluated

maturityDate - the date when the zero bond matures

businessCalendar - The instance of a BusinessCalendar interface implementation. Specify null to select the London business calendar.

TreasuryPriceDemoException

RemoteException

zeroYieldToMaturity

public double zeroYieldToMaturity(double principalSum,
                                  double marketPrice,
                                  double timeToMaturity)
                           throws TreasuryPriceDemoException,
                                  RemoteException

Evaluates the yield to maturity (YTM) (also known as the internal rate of return) of a zero coupon bond. Note, that this method can be applied to all bonds (i.e. corporate and treasury)

Parameters:

principalSum - the principal sum which will be repaid at expiry

marketPrice - the present market price of the bond

timeToMaturity - the time in years (expressed in decimal format) until the bond matures

TreasuryPriceDemoException

RemoteException

yieldToMaturityFromPrice

public double yieldToMaturityFromPrice(double price,
                                       double[] payments,
                                       Date evaluationDate,
                                       Date[] paymentDates,
                                       BusinessCalendar businessCalendar)
                                throws TreasuryPriceDemoException,
                                       RemoteException

Here the yield to maturity of a bond is derived from its price, payments and time of these payments. Note that these payments will include the payment of the principal sum at the maturity of the bond.

Parameters:

price - the market price of the bond

payments - an array of doubles where the first element represents the first coupon payment the second element the second coupon payment and so on until the final payment, which will represent the payment of the bonds principal sum

evaluationDate - the date when the yield of the bond is evaluated

paymentDates - an array of dates where the first term corresponds to the first payment date, the second term corresponds to the second payment date and so on, until the final term which will represent the payment of the principal sum at the maturity of the bond

businessCalendar - The instance of a BusinessCalendar interface implementation. Specify null to select the London business calendar.

TreasuryPriceDemoException

RemoteException

yieldToMaturityFromPrice

public double yieldToMaturityFromPrice(double price,
                                       double[] payments,
                                       double[] time2Payments)
                                throws TreasuryPriceDemoException,
                                       RemoteException

Here the yield to maturity of a bond is derived from its price, payments and time of these payments. Note that these payments will include the payment of the principal sum at the maturity of the bond.

Parameters:

price - the market price of the bond

payments - an array of doubles where the first element represents the first coupon payment the second element the second coupon payment and so on until the final payment, which will represent the payment of the bonds principal sum

time2Payments - an array of doubles where the first element represents the time in years until the first payment, the second term represents the time in years until the second payment and so on... Until the final term which represents the time in years until the principal sum of bond is paid, or equivalently the time in years until expiry.

TreasuryPriceDemoException

RemoteException

parYield

public double parYield(double principalSum,
                       Date evaluationDate,
                       Date maturityDate,
                       boolean annualOrSemi,
                       double maturityZero,
                       Date[] paymentDates,
                       double[] zeroCurveOnCouponPaymentDates,
                       BusinessCalendar businessCalendar)
                throws TreasuryPriceDemoException,
                       RemoteException

We evaluate the Par Yield of a Treasury bond which pays annual or semi-annual coupons. Recall, that the Par yield for a given maturity is the yield to causes the bonds price to equal the principle sum (or face value) repaid at maturity.

The Treasury bonds Par yield is evaluated using the zero term structure of the corresponding Treasury zero curve. In order to apply this approach the zero curve will need to be evaluated on maturities which correspond to the coupon payment dates. For example, if we consider a two year bond which pays a semiannual coupon then the Treasury zero rates will need to be known for the maturities 0.5, 1, 1.5 and 2 years.

Parameters:

principalSum - the principal sum (also known as the face value) of the bond

annualOrSemi - when the coupon is paid annually then this parameter is true and if the coupon is paid semi-annually then it is false

maturityZero - the zero rate for the maturity of the bond under consideration

zeroCurveOnCouponPaymentDates - an array where the first term is the Treasury zero interest rate of maturity equal to the time until the first coupon payment, and the second term is the Treasury zero interest rate of maturity equal to the time until the second coupon payment, and so on...

evaluationDate - the date when the Par Yield is evaluated

maturityDate - the date when the bond matures

paymentDates - an array of dates where the first element is the date of the first coupon payment and the second element is the date of the second coupon payment and so on

businessCalendar - The instance of a BusinessCalendar interface implementation. Specify null to select the London business calendar.

TreasuryPriceDemoException

RemoteException

parYield

public double parYield(double principalSum,
                       double maturity,
                       boolean annualOrSemi,
                       double maturityZero,
                       double[] timeToCoupons,
                       double[] zeroCurveOnCouponPaymentDates)
                throws TreasuryPriceDemoException,
                       RemoteException

We evaluate the Par Yield of a Treasury bond which pays annual or semi-annual coupons. Recall, that the Par yield for a given maturity is the yield to causes the bonds price to equal the principle sum (or face value) repaid at maturity.

The Treasury bonds Par yield is evaluated using the zero term structure of the corresponding Treasury zero curve. In order to apply this approach the zero curve will need to be evaluated on maturities which correspond to the coupon payment dates. For example, if we consider a two year bond which pays a semiannual coupon then the Treasury zero rates will need to be known for the maturities 0.5, 1, 1.5 and 2 years.

Parameters:

principalSum - the principal sum (also known as the face value) of the bond

maturity - the maturity of the bond in years expressed in decimal format

annualOrSemi - when the coupon is paid annually then this parameter is true and if the coupon is paid semi-annually then it is false

maturityZero - the zero rate for the maturity of the bond under consideration

timeToCoupons - an array where the first term is the number of years expressed as a decimal until the first coupon payment is made, and the second term is the number of years until the second coupon payment is made and so on...

zeroCurveOnCouponPaymentDates - an array where the first term is the Treasury zero interest rate of maturity equal to the time until the first coupon payment, and the second term is the Treasury zero interest rate of maturity equal to the time until the second coupon payment, and so on...

TreasuryPriceDemoException

RemoteException