Suppose a = 0.05, = 0.015, and the term structure is flat at 10%. Construct a

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Suppose a = 0.05, σ = 0.015, and the term structure is flat at 10%. Construct a trinomial tree for the Hull-White model where there are two time steps, each one year in length.

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Options Futures and Other Derivatives

ISBN: 978-0134472089

10th edition

Authors: John C. Hull

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Question Posted: Feb 12, 2018 12:33 PM

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Suppose a = 0.05, = 0.015, and the term structure is flat at 10%. Construct a

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The time step is 1 so that Also showing that the branching method should change four steps ...View the full answer

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