R Tutorial: Bond Valuation and Analysis | Intro

Want to learn more? Take the full course at https://learn.datacamp.com/courses/bond-valuation-and-analysis-in-r at your own pace. More than a video, you'll learn hands-on coding & quickly apply skills to your daily work. --- Welcome to this course on Bond valuation and analysis in R! My name is Cliff Ang. I am Vice President at Compass Lexecon, an economic consulting firm. I advise clients on a variety of financial issues, such as valuation and corporate finance. I am also the author of Analyzing Financial Data and Implementing Financial Models Using R. My book serves as a reference and I encourage everyone to check it out for additional material. In this course we focus on the simplest but most common of the group of fixed income instruments - a bond. A bond is a debt instrument that requires the issuer to repay the lender the amount he or she borrows plus interest over a specified period of time. Using bonds allow us to learn the fundamental concepts of bond valuation and analysis without the unnecessary complications that arise when using more complex fixed income securities. Each bond has some basic characteristics that define it. We now describe some of these main characteristics. Each bond has an issuer. This is the entity that borrows the money. Some examples are corporations, governments, or municipalities. The amount borrowed is called the principal. The principal is also called the par value or face value of the bond. The amount of interest paid is denoted by the coupon rate. Coupon rates can be paid out at different frequencies, such as annually, semi-annually, or quarterly. Coupons can be fixed for the life of the bond or they can be floating, meaning they change at each payment period. Most bonds have a maturity date. This is when the bond ceases to become outstanding and the principal is paid back. However, some bonds don't mature. An example are consol bonds issued by the British Government. Finally, some bonds also have embedded options.