1. Deliverables for Oct 5 -Download our “living spec” prototype spreadsheet (ytm_sheet.xls). -Commence working as teams -9 students divided into 4 teams of 2 + 1 working solo -Build calculator class around PV function -Calculate price from yield -Calculate first partial derivative -Start building your class library -Download sample code to load test data -File access & parsing (for your util library) -Parsing inputs -What constraints were imposed?

2. YTM - Number of Cash Flows Parameterized (It’s a geometric series…)

3. YTM - Frequency Parameterized

4. While more programmer friendly, what do we assume with this formula? Assumes all intermediate flows are discounted at same rate –(the YTM) Assumes all flows are discounted at same frequency –annual, semi-annual, quarterly… A more general implementation is the “cash-flow series” A collection of individual cash-flows which can: –Support assigning different interest rates to individual cash-flows –Represent changing principal amounts (e.g., for amortizing instruments) –Support independent processing of individual cash-flows (e.g., date adjustments)

5. YTM - Pricing a Zero Coupon

6. Deliverables for Oct 19 -Implement a “living spec” prototype spreadsheet for the geometric series based YTM formula -Download new versions of libraries on our website: -SBB_io class (to be able to read frequency) -SBB_date class -Build in support for a “Zero Coupon” Bond -Build a “trading book” collection class to handle a heterogeneous mix of types… -Possible “collectable” abstractions: -Instrument -Calculator -Bond -Criteria for class design: separately testable -Best way to use the SBB_io class data? -Inherit? Contain? Use? (recall “is-a”, “has-a”, “uses”…) -Load in new a data file (on website) to test an expanded portfolio of bonds…