Question
0 1 3 RHH= RH=5.2214% R=4% RHL= RL=3.5000% RLL=3.2% a) This binomial tree has been created assuming volatility of interest rates of 20%. What should
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| RH=5.2214% |
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| R=4% |
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| RL=3.5000% |
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| RLL=3.2% |
a) This binomial tree has been created assuming volatility of interest rates of 20%. What should be the price of a 2year, 3.8% coupon government note that pays coupons annually?
b) Given the binomial tree above, what would be the price of a 3.8% coupon government bond if it could be put any time starting with the first year (including)?
c) Given the binomial tree above, what is the value of a put option that would allow the investor to get 100% of the par value back at any time after 1 year?
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Emerging Market Finance New Challenges And Opportunities
Authors: Bang Nam Jeon, Ji Wu
1st Edition
1839820594, 978-1839820595
