Using the binomial model (which assumes that one-year rates undergo a lognormal random walk with volatility s),

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Using the binomial model (which assumes that one-year rates undergo a lognormal random walk with volatility s), show that if s is assumed to be 15%, is it correct that the lower one-year forward rate one year from now equal to 7.5 %.

Posted Date: May 18, 2024 10:12 PM

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Using the binomial model (which assumes that one-year rates undergo a lognormal random walk with volatility s),

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