Standard Securities Calculation Methods

Fixed Income

Fixed Income Securities Formulas
Price, Yield, and Accrued Interest

This Fourth Edition of Volume 1 is an update of the 1993 third edition, plus additional new material. As with the prior three editions, the book contains the industry standard formulas and discussions of calculating techniques, for the computation of yields and prices for municipal, corporate, money market, US. Government and Federal Agency fixed income securities.

New and updated in the Fourth Edition:

  • Formulas have been added for Coupon Bearing Certificates of Deposit.
  • Formulas have been added for Payment in Kind (PIK) securities.
  • The 30/360 Day Count Basis methodology has been adjusted to consider coupon payment cycles (End-of-Month rule).
  • A section detailing how to calculate the component parts of a coupon period, including quasi-coupons, has been added.
  • Information from the U.S. Treasury on calculations for Treasury securities in the primary market has been added.
  • MSRB Rule G-33 information has been changed to reflect the 2016 rule modification whereby the number of coupons per year are considered in calculations.
  • All of the calculation examples and Benchmarks have been updated to reflect current generally accepted practices and calculation rules.

The book is organized in three basic sections: instruments described by classification, calculation methods and formulas, and the appendices. Descriptions for instruments have been compiled from and referenced against various sources and give basic information as to the nature and characteristics of various securities. The methods of calculation and formulas are broken down as to: (1) General Considerations, (2) Day Counting, (3) Determining Component Parts of a Period, (4) Interest Computations, (5) Price-Yield Computations, (6) Iteration Theory and Solving for Yield, and (7) Estimated Yield.

The Appendix contains: (1) copies of important rules to be considered when pricing securities (FINRA Section 11620, MSRB Rule G-33, and CFR Part 356), and (2) several benchmarks for each formula, providing comparative calculation results for user verification.

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