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Graph of number of coupons, n vs the expected number of trials (i.e., time) needed to collect them all, E (T ) In probability theory, the coupon collector's problem refers to mathematical analysis of "collect all coupons and win" contests.
Duration (finance) In finance, the duration of a financial asset that consists of fixed cash flows, such as a bond, is the weighted average of the times until those fixed cash flows are received. When the price of an asset is considered as a function of yield, duration also measures the price sensitivity to yield, the rate of change of price ...
A discount rate [2] is applied to calculate present value. For an interest-bearing security, coupon rate is the ratio of the annual coupon amount (the coupon paid per year) per unit of par value, whereas current yield is the ratio of the annual coupon divided by its current market price.
Since a loan by a borrower is an investment for the lender, both terms can apply to the same transaction, depending on the point of view. For a zero-coupon bond such as a US treasury bill, an annual effective discount rate may be specified instead of an effective interest rate, because zero coupon bonds trade at a discount from their face values.
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In finance, a day count convention determines how interest accrues over time for a variety of investments, including bonds, notes, loans, mortgages, medium-term notes, swaps, and forward rate agreements (FRAs). This determines the number of days between two coupon payments, thus calculating the amount transferred on payment dates and also the ...
Tree returning the OAS (black vs red): the short rate is the top value; the development of the bond value shows pull-to-par clearly. A short-rate model, in the context of interest rate derivatives, is a mathematical model that describes the future evolution of interest rates by describing the future evolution of the short rate, usually written .
Coupon (finance) In finance, a coupon is the interest payment received by a bondholder from the date of issuance until the date of maturity of a bond. [ 1] Coupons are normally described in terms of the "coupon rate", which is calculated by adding the sum of coupons paid per year and dividing it by the bond's face value. [ 2]