# I have written this code in Notepad++ and copied here.
## ONS - PPA
Duration = function(par_value, coupon_rate, freq_coupon, tenure, ytm)
{
macaulay_duration = NULL
modified_duration = NULL
freq_coupon_new = NULL
if(freq_coupon <= 0)
{
freq_coupon_new = 365
}
if(freq_coupon > 0 & freq_coupon <= 1)
{
freq_coupon_new = 12
}
if(freq_coupon > 1 & freq_coupon <= 2)
{
freq_coupon_new = 4
}
if(freq_coupon > 2 & freq_coupon <= 3)
{
freq_coupon_new = 2
}
if(freq_coupon > 3 & freq_coupon <= 4)
{
freq_coupon_new = 1
}
## COMPUTATIONS
terms_coupon_payment = (seq(1/freq_coupon_new, tenure, by =
1/freq_coupon_new))*freq_coupon_new
coupon = coupon_rate*par_value/100
coupon_amount = coupon/(freq_coupon_new)
cash_flow1 = rep(c(coupon_amount), (tenure*freq_coupon_new -
1))
cash_flow2 = par_value + coupon_amount
cash_flow = c(cash_flow1, cash_flow2)
ytm_effective = ((1+ytm/100)^(1/freq_coupon_new))-1
pv = NULL
for (i in 1:(tenure*freq_coupon_new))
{
pv[i] = cash_flow[i] / ((1+ytm_effective)^terms_coupon_payment[i])
}
macaulay_duration = sum(pv*terms_coupon_payment)/sum(pv)
modified_duration = macaulay_duration / (1+(ytm_effective)/freq_coupon_new)
return(data.frame(macaulay_duration, modified_duration))
}
result = Duration(par_value = 1000, coupon_rate = 10, freq_coupon = 0, tenure =
5, ytm = 12)
## _______
When I run this function, I get the values of Macaulay Duration and Modified
Duration
> result
macaulay_duration modified_duration
1 1423.797 1423.795
### MY PROBLEM
I have arrived at a result using only one set of observations i.e. for the
following data -
Duration(par_value = 1000, coupon_rate = 10, freq_coupon = 0, tenure = 5, ytm =
12)
However, if I need to obtain these results for multiple records, how do I
calculate and obtain the result in a tabular form?
e.g. suppose my input data file is 'instrument details.csv' given as
id par_value coupon_rate frequency_coupon tenure ytm
1 1000 10 0
5 12
2 100 7 1
8 11
### frequency_coupon is coded s.t. if frequency_coupon = 0, no of compoundings
in a year = 365 and if it is 1, then no of compoundings = 12
Then how do modify the above code?
I have tried to convert in a matrix form as follows
I have added following code after the function is defined i.e. after
#return(data.frame(macaulay_duration, modified_duration))
#}
# Added code
ONS = read.csv('instrument details.csv')
n = length(ONS$par_value)
par_value = matrix(data = ONS$par_value, nrow = n, ncol = 1, byrow = TRUE)
coupon_rate = matrix(data = ONS$coupon_rate, nrow = n, ncol = 1, byrow =
TRUE)
freq_coupon = matrix(data = ONS$frequency_copoun, nrow = n, ncol = 1, byrow =
TRUE)
tenure = matrix(data = ONS$tenure, nrow = n, ncol = 1, byrow = TRUE)
ytm = matrix(data = ONS$ytm, nrow = n, ncol = 1, byrow = TRUE)
result = matrix(data = NA, nrow = n, ncol = 2, byrow = TRUE)
result = Duration(par_value, coupon_rate, freq_coupon, tenure, ytm)
## ________________________________________________________
When I run result, besides getting 50 warnings, I get following
> result
macaulay_duration modified_duration
1 826.9026 826.9019
2 826.9026 826.9019
which is I know wrong.
Is there any other way I can use the function defined above to process multiple
recrds.
Thanking you and sincerely apologize for writing such a long mail as I wanted
to be clear in my communication.
Regards
Madhavi Bhave
ONS = read.csv('instrument details.csv')
n = length(ONS$par_value)
par_value = matrix(data = ONS$par_value, nrow = n, ncol = 1, byrow = TRUE)
coupon_rate = matrix(data = ONS$coupon_rate, nrow = n, ncol = 1, byrow =
TRUE)
freq_coupon = matrix(data = ONS$frequency_copoun, nrow = n, ncol = 1, byrow =
TRUE)
tenure = matrix(data = ONS$tenure, nrow = n, ncol = 1, byrow = TRUE)
ytm = matrix(data = ONS$ytm, nrow = n, ncol = 1, byrow = TRUE)
result = matrix(data = ONS$par_value, nrow = n, ncol = 2, byrow =
TRUE)
result = Duration(par_value, coupon_rate, freq_coupon, tenure, ytm)
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