BUSINESS INFORM №1-2014

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Section: Economic and Mathematical Modeling
UDC 336.001.57.004
Hlotov Y. O., Cherevatenko V. A.
Identification of Factors of Influence upon the Cost of Fixed Coupon Securities (p. 92 - 97)
The article studies fixed coupon securities (bonds). It provides a calculation of the cash flow, generated by fixed coupon securities, with enclosed discounted face value of securities. It analyses time indicator – average weighted duration of payments, which characterises sensitivity of the price of securities to changes of interest rates in the market. It proves availability of two groups of interconnections between the cost of a bond, coupon rate, market rate (rate of return) and term of its payment. The first group of interconnections reflects interconnections between the cost of a bond, coupon rate and market rate (rate of return). The second group characterises connection between the bond cost and term of its payment. The authors study the average weighted duration of payments. It plays an important role in analysis of long-term securities with fixed income. To simplify calculations it was accepted that the coupon payment is done once a year. The article offers a formula for identifying inaccuracy of the bond price depending on the expected change of profitability on payment. Analysing duration properties the article identifies shortcomings inherent in this indicator. Taking into account the average weighted duration of payments the article recommends a formula, as more efficient, for identification of the future bond price depending on change of profitability. The conducted studies are a theoretical ground for development of models of management of fixed income securities portfolios. The obtained scientific results could be used in the educational process both in colleges and specialised trainings of securities specialists. The scientific results could be used for developing information technologies when identifying cost of securities (fixed coupon bonds).
Keywords: cash flow, average weighted duration of payments, current cost, annual rate, market rate, term of repayment, payment period, face value, number of coupon payments
Fig.: 4. Tabl.: 1. Formulae: 18. Bibl.: 15.

Hlotov Yevhen O. – Candidate of Sciences (Engineering), Associate Professor, Head of the Department, Department of Economic and Mathematical Methods and Information Technology, Kharkiv Institute of Finance of the Kyiv National University of Trade and Economics (5 Pletnovskyi Lane, Kharkіv, 61003, Ukraine)
Email: [email protected]
Cherevatenko Volodymyr A – Candidate of Sciences (Economics), Associate Professor, Deputy Director, Kharkiv Institute of Finance of the Kyiv National University of Trade and Economics (5 Pletnovskyi Lane, Kharkіv, 61003, Ukraine)
Email: [email protected]

Article is written in Ukrainian
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Reference to this article:
Hlotov, Yevhen O., and Cherevatenko, Volodymyr A. (2014) “Identification of Factors of Influence upon the Cost of Fixed Coupon Securities.” Business Inform 1:92–97.

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