Tools to analyze interest rates and value bonds

Tim Schmidt ()
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Tim Schmidt: Discover Financial Services

2019 Stata Conference from Stata Users Group

Abstract: Bond markets contain a wealth of information about investor preferences and expectations. However, extracting such information from market interest rates can be computationally burdensome. I introduce a suite of new Stata commands to aid finance professionals and researchers in using Stata to analyze the term structure of interest rates and value bonds. The genspot command uses a bootstrap methodology to construct a spot rate curve from a yield curve of market interest rates under a no-arbitrage assumption. The genfwd command generates a forward rate curve from a spot rate curve, allowing researchers to infer market participants’ expectations of future interest rates. Finally, the pricebond command uses forward rates to value a bond with user-specified terms.

Date: 2019-08-02
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http://fmwww.bc.edu/repec/scon2019/chicago19_Schmidt.pdf

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Persistent link: https://EconPapers.repec.org/RePEc:boc:scon19:21

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