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You are given the following information about a Black-Derman-Toy model of interest rates: The length of each period is one year. In the first year,
You are given the following information about a Black-Derman-Toy model of interest rates: The length of each period is one year. In the first year, ro = 9% In second year, ru = 12.6% and rd=9.3% In third year, Tuu = 17.2% and rda = 10.6%. Calculate the price of a 3-year interest-rate cap for notional amount 10,000 and cap rate 11.5%. You are given the following information about a Black-Derman-Toy model of interest rates: The length of each period is one year. In the first year, ro = 9% In second year, ru = 12.6% and rd=9.3% In third year, Tuu = 17.2% and rda = 10.6%. Calculate the price of a 3-year interest-rate cap for notional amount 10,000 and cap rate 11.5%
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