New answers tagged bonds
0
Who will buys bonds; not including the FED
When a government wants to issue bonds, it will usually do so via a bond auction, where the bond will be bought by large banks or financial institutions.
Those institutions will then sell the bonds on, often to pension funds, other banks, and individual investors. So other banks and individuals also buys bonds.
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You did not apply your formula correctly.
Your top formula is correct. But in your bottom formula, the numerator on the left side of the equation is a percentage. It should, instead, be a monetary unit of £ in this case.
The annual coupon payment should be denominated in £. Not a percentage. Otherwise, the units don't balance each other and don't match the ...
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(Looking at the question and notation used more closely, the formulation seems to be problematic in couple places.)
General Fact
Let $W$ be standard Brownian motion with respect to filtration $( \mathscr F_t )_{t \in [0,T]}$. Consider $(L_t)_{t \in [0,T]}$ defined by
$$
\frac{dL_t}{L_t} = \psi_t dL_t, \; L_0 = 1.
$$
In general, $L_t = e^{\int_0^t \psi_s ...
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