About some anomalies in bond valuation and its consequences

In common used bond pricing methods very simplifying assumptions are accepted. It leads to the interpretations of obtained formulas which omit many interesting properties of bonds. In presented paper author resigns with any simplifications and gives general formulas for bond pricing with not flat yield curve, not constant coupon periods and coupon payments. In consequence he obtains some anomalies in bond pricing for some special relation between coupon rate and forward rate of return. It specifically consists in raising value of bond when market rates are increasing. There are some problems with the definition of yield to maturity in this case. It occurs that such situations often appear in real market and examples from polish bond market are presented.

Key words: bonds pricing, yield curve, yield to maturity, coupon payments.