Verify that the DerivaGem software gives Figure 28.11 for the example considered. Use the software to calculate the price of the American bond option for the lognormal and normal models when the strike price is 95, 100, and 105. In the case of the normal model, assume that a = 5% and = 1%. Discuss the results in the context of the heaviness of the tails arguments of Chapter 16.

AppendixLO1