Yield of a discount security formula

Tags: interest rate instruments money market instruments pricing and analysis

Description of the Yield of a discount security formula

Formula for the calculation of the yield of discount securities like Treasury bills, commercial paper or certificates of deposit.

r = (\frac{C_{m}}{C_{v}} - 1) \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