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PRICES

Caroline Douet

Created on June 8, 2023

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Transcript

PRiCES 101

From clean price to settlement price

Interest Rates & Prices

Prices in Cicada

What is a bond?

PRiCES 101

A debt

What is a bond?

Fixed-income instrument

Principal or Nominal

Coupon

Maturity

10

10

1 0

10

10

10

1 0

10

10

10

100

  • Nominal value = 100
  • Coupon rate = 10%

Issued Amount - OutstandingMaturity Date

PRiCES 101

A debt

What is a bond?

Fixed-income instrument

Principal or Nominal

Coupon

Maturity

1 price & 1 yield

Secondary Market Price📉 /Yield 📈

Primary Market Price = Nominal Value

PRiCES 101

Interest Rates

Price & Interest rate relation

Prices

2022

2020

  • Bond B is more attractive than Bond A
  • To increase Bond A competitiveness, its price has to be lowered

100

XX

Bond A Nominal = 100Coupon rate = 10%Coupon = 10 Maturity = 10 years

Bond A Nominal = 100Coupon rate = 10%Coupon = 10 Maturity = 10 years

100

Bond B Nominal = 100 Coupon rate = 20% Coupon = 20 Maturity = 10 years

PRiCES 101

Interest Rates

Price & Interest rate relation

Prices

2022

2020

  • Simple formula:
new_price * bond_b_coupon_rate = bond_a_couponnew_price = bond_a_coupon / bond_b_coupon_ratenew_price = 10 / 20%new_price = 50

100

50

Bond A Nominal = 100Coupon rate = 10%Coupon = 10 Maturity = 10 years

Bond A Nominal = 100Coupon rate = 10%Coupon = 10 Maturity = 10 years

100

Bond B Nominal = 100 Coupon rate = 20% Coupon = 20 Maturity = 10 years

PRiCES 101

Clean Price

+ fee / + vat

- fee / - vat

+ ACCRUEd interest

Dirty price

all-in price (SELLER)

all-in price (buyer)

Settlement price

PRiCES 101

Limit = max/min

PRiCES 101

Execution Price

PRiCES 101

Trading securities

https://www.notion.so/mtrade/Securities-operations-16f506f1b3b74038931791634129fc0d?pvs=4

Relation Prices and Interest Rates

Khan Academy: https://www.youtube.com/watch?v=I7FDx4DPapw

Prices computation in Cicada

https://lucid.app/lucidchart/ecf1cd08-7913-4954-b5d7-088abfc731e6/edit?invitationId=inv_cbebb747-896d-4c06-8d5a-e84a958efc28&page=0_0#

Language Standardization

https://www.notion.so/mtrade/d4a2fec01de64d21a343cde2a5973d18?v=4eabace7aa0943c197b1926aa758505c&pvs=4

Financial information

https://www.investopedia.com/