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In the lectures, we have written programs for bond pricing in discrete time. We have also talked about the theory for bond pricing and yields in continuous time. In this exercise, you will implement a bond class with methods to go between yields and prices of arbitrary bonds.

a)  Design a bond class that can be used for general coupon bonds, making annual payments, to calculate yield to maturity (YTM) and bond prices. A continuous compounding convention for YTM calculations should be used. The bond declaration may look something like:

class bond {
public:
      bond() {}
      bond() {}
      bond(double T0,double C0, double P0,double t0);
      void set_price(double Price0);
double get_price();
      void set_YTM(double YTM0);
      double get_YTM();
      double T; 
      double t;
      double C;
      double P;
private:
      double Price;
      double YTM;
};
 
You may also wish to include additional methods and attributes. The reason why the original time to maturity, T, the current time, t, the coupon payments, C, and the principal, P, are public fields, whereas the Price and Yield to maturity are defined as private fields is that the former are general attributes of a bond and can take on arbitrary (nonnegative) values, whereas the latter two are linked: one implies the other.
 
b) Create a method that calculates the bond price, given, YTM T, t, C and P.

c) Create a method that calculates the YTM, given Price, T, t, C and P.
 
d) Write a program that uses your class to calculate the YTM for a bond and the price of another bond.

Java, Programming

  • Category:- Java
  • Reference No.:- M9538593

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