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= Construct an 10-period binomial model for the short-rate, rinj. The lattice parameters are: 80,0 = 5%, u = 1.1, d= 0.9 and q =1-q=
= Construct an 10-period binomial model for the short-rate, rinj. The lattice parameters are: 80,0 = 5%, u = 1.1, d= 0.9 and q =1-q= 1/2. This is the same lattice that you constructed in Assignment 5. Assume that the 1-step hazard rate in node (i, j) is given by hij = abi where a = 0.01 and b = 1.01. Compute the price of a zero-coupon bond with face value F 100 and recovery R= 20%. Submission Guideline: Give your answer rounded to two decimal places. For example, if you compute the answer to be 73.2367, submit 73.24
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