Bond Valuation and Analysis in Python
Learn how bonds work and how to price them and assess some of their risks using the numpy and numpy-financial packages.
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Course Description
The world’s bond market has a value of around 120 trillion dollars; it plays a key role in helping both governments and businesses raise capital and is an essential part of most investment portfolios. In this course, you’ll gain the essential skills needed to work in the financial, insurance, and accounting industries, including understanding and analyzing markets. Through hands-on activities, you’ll discover how bonds work, how to price them, and how to assess some of their risks using numpy and numpy-financial packages.
- 1
Time Value of Money
FreeIn this chapter, you’ll cover simple and compound interest, compounding frequencies, future value as well as commonly used financial functions in the NumPy-financial package.
Simple interest & compound interest50 xpCalculating simple interest100 xpCalculating compound interest100 xpFuture value & compounding frequencies50 xpCalculating future value100 xpCalculating compounding frequencies100 xpMore financial functions50 xpCalculating the number of periods100 xpCalculating the payment amount100 xpCalculating the required interest rate100 xpSolving real-world problems100 xp - 2
Bond Prices & Yields
Let’s get fiscal. You’ll discover how to find the price of both zero-coupon and coupon-paying bonds, as well as examining the relationship between bond prices and bond yields.
Present value & zero coupon bonds50 xpCalculating present value100 xpPricing zero coupon bonds100 xpCoupon paying bonds50 xpImpact of bond yields on price100 xpImpact of coupons on price100 xpBond prices vs. bond yields50 xpDiscount vs. par vs. premium100 xpPlotting bond prices against yields100 xpCalculating bond yields50 xpComparing zero coupon bond yields100 xpComparing coupon bond yields100 xp - 3
Duration
Now it’s time for you to explore interest rate risk via the concept of duration, the factors affecting duration, and how to use duration to predict the price changes of a bond or hedge bond portfolios.
Duration50 xpInterest rate sensitivity of two bonds100 xpZero coupon and coupon bond duration100 xpFactors affecting duration50 xpThe bond with the highest duration50 xpComparing the duration of two bonds directly100 xpUsing the steepness of the price/yield line100 xpPlotting duration vs. the factor100 xpDollar duration & bond price prediction50 xpPercent duration and dollar duration100 xpCreating a duration neutral portfolio100 xpPredicting price impacts from duration100 xp - 4
Convexity
In the final chapter, you’ll be introduced to convexity. You’ll see how it helps address the weaknesses inherent in duration, examine the factors affecting convexity, and use both duration and convexity together to better predict bond prices.
Convexity50 xpPredicted vs. actual prices I100 xpPredicted vs. actual prices II100 xpFinding the convexity of a bond100 xpFactors affecting convexity50 xpThe bond with the highest convexity50 xpComparing the convexity of two bonds directly100 xpUsing the curvature of the price/yield line100 xpPlotting convexity vs. the factor100 xpDollar convexity and bond price prediction50 xpDollar convexity100 xpConvexity adjustment100 xpCombining duration and convexity100 xpCongratulations!50 xp
Collaborators
Hadrien LacroixPrerequisites
Python Data Science Toolbox (Part 1)
Joshua Mayhew
Options Trader
Josh works as an options trader for an investment bank based in London.
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Lloyds Banking Group
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Harvard Business School
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Decision Science Analytics, USAA
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