Yield of a discount security on a bank discount basis formula

Tags: interest rate instruments money market instruments pricing and analysis

Description of the Yield of a discount security on a bank discount basis formula

Formula for the calculation of the yield of a discount security, like T-Bills or commercial papers, on a bank discount basis.

r = \frac{C_{v}}{C_{m}} \cdot \frac{n b j_{b a s e}}{n b j_{v d \to m d}}

C_{m}

Redeemed capital (generally par)

C_{v}

Price of the security at value date

n b j_{b a s e}

Number of days per year (360, 365 or 366 depending on )

n b j_{v m}

Number of days between value date and maturity date