Should be answered by building an n =n=10-period binomial model for the short-rate, r_{i,j}ri,j. The lattice parameters
Question:
Should be answered by building an n =n=10-period binomial model for the short-rate, r_{i,j}ri,j. The lattice parameters are: r_{0,0} = 5%r0,0=5%, u = 1.1u=1.1, d = 0.9d=0.9 and q =1-q = 1/2q=1−q=1/2.
zero-coupon bond (ZCB) that matures at time t = 10t=10 and that has face value 100. Compute the price of a forward contract on the same ZCB of the previous question where the forward contract matures at time t = 4?
Compute the initial price of a futures contract on the same ZCB of the previous two questions. The futures contract has an expiration of t = 4
Compute the price of an American call option on the same ZCB of the previous three questions. The option has expiration t = 6 and strike = 80
Fundamentals of Thermodynamics
ISBN: 978-0471152323
6th edition
Authors: Richard E. Sonntag, Claus Borgnakke, Gordon J. Van Wylen