Question: Seeking step by step help; the answer is there i just dont understand how to get to those numbers Suppose a = 0.05, o =0.015,

Seeking step by step help;

the answer is there i just dont understand how to get to those numbers

Seeking step by step help; the answer is there i just dont

Suppose a = 0.05, o =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. The time step, At, is 1 so that Ar=0.01573 = 0.02598. Also jimax = 4 showing that the branching method should change four steps from the center of the tree. With only three steps we never reach the point where the branching changes. The tree is shown in Figure S31.1. E B F A G 0888 D H I Node r A 10.00% 0.1667 B 12.61% 0.1429 C 10.01% 0.1667 7.41% 0.1929 E 15.24% 0.1217 F 12.64% 0.1429 G 10.04% 0.1667 H 1 7.44% 4.84% 0.1929 0.2217 Pu 0.6666 Pm 0.6642 0.6666 0.6642 0.6567 0.6642 0.6666 0.6642 0.6567 0.1667 0.1929 0.1667 0.1429 0.2217 0.1929 0.1667 0.1429 0.1217 Suppose a = 0.05, o =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. The time step, At, is 1 so that Ar=0.01573 = 0.02598. Also jimax = 4 showing that the branching method should change four steps from the center of the tree. With only three steps we never reach the point where the branching changes. The tree is shown in Figure S31.1. E B F A G 0888 D H I Node r A 10.00% 0.1667 B 12.61% 0.1429 C 10.01% 0.1667 7.41% 0.1929 E 15.24% 0.1217 F 12.64% 0.1429 G 10.04% 0.1667 H 1 7.44% 4.84% 0.1929 0.2217 Pu 0.6666 Pm 0.6642 0.6666 0.6642 0.6567 0.6642 0.6666 0.6642 0.6567 0.1667 0.1929 0.1667 0.1429 0.2217 0.1929 0.1667 0.1429 0.1217

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