Question: 2. Binomial Tree Pricing Time 0 0.5 1 Period i 0 l 2 .i 0 2.33% 5.1042% T.0284% l 2.28% 4.2% 2 l .3216% With

2. Binomial Tree Pricing Time 0 0.5 1 Period i 0 l 2 .i 0 2.33% 5.1042% T.0284% l 2.28% 4.2% 2 l .3216% With probability of \"up\" movement p=0.6 Maturity 0.5 1 1.5 2 yield 2.33% 3.137532% 3.631533 4.3085% A modied index amortizing swap (henceforth, the swap) is a swap whose notional value decreases over time depending on the interest rate scenario. Consider the index amortizing swap with initial notional N0 = 100 with the following characteristics: i. Maturity i=2 ii. Amortization schedule: a. Ifr,

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