24. (Concept Problem) Use the Black model to determine a fair price for an interest rate put...
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24. (Concept Problem) Use the Black model to determine a fair price for an interest rate put that expires in 74 days. The forward rate is 9.79 percent, and the exercise rate is 10 percent. The appropriate risk-free rate is 8.38 percent. All rates are con- tinuously compounded. The volatility of forward rates is 14.65 percent. The put is based on $22 million notional principal and pays off based on 90-day LIBOR.
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An Introduction To Derivatives And Risk Management
ISBN: 9780324321395
7th Edition
Authors: Don M. Chance, Roberts Brooks
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