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YouTube T3-09: Theoretical price of a bond using spot rates

Nicole Seaman

Director of FRM Operations
Staff member
The theoretical bond price is the present value if the future cash flows are discounted at the spot (aka, zero rates); in other words, it is the price given by discounted cash flow (DCF). We don't expect the traded (observed) price to exactly match because the DCF price is fundamental, yet technical factors influence price too (e.g., supply/demand, liquidity).

David's XLS is here: https://trtl.bz/2GyTeex

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