Bond pricing is a type of valuation you can use to determine the monetary worth of the bond. In most cases, the bond pricing provides the current, or present value, based on the stream of cash flows the bond should generate. To find this, a bond valuation service discounts the anticipated cash flow from the current value. If the difference is positive, the bond makes money. If it is negative, the bond is losing money. By knowing bond pricing, you can determine whether or not you want to buy or sell bonds according to your investment strategy.
While it may seem simple to calculate bond pricing, there are other factors involved, including the sensitivity of the bond and its various yields. Bonds with embedded options also require additional information to find the actual value. These bonds combine option pricing, and the value of the bond needs to adjust based on the value of the option. In addition to this, an investment company may use more than one method to price bonds, depending on the type of bond.
Instead of trying to do the calculations on your own, consider working with a company that provides bond pricing. You can find online investment companies that will handle your portfolio and provide pricing on bonds for you as part of their services. Some companies allow you to price check the bond at any given moment to get the most current value for it. This can come in handy if you need a value between scheduled updates for your portfolio. To use the price check option, provide a description of the bond or an identification number like the CUSIP. When the tool finds the current price, it will provide you with additional information like the latest trade, the spread and the average price.