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Question: Finding out the one-year's forward rates for year 1 using the two-ye
Assumption
r1,L 4.07%
Given
Sigma 10%
V=
NHHH C=
r3,HHH= 0.000%
V= 100
NHH C= 4
r2,HL= 0.000%
V=
NHHL C=
r3,HHL= 0.000%
V= 100
NHL C= 4
r2,HL= 0.000%
V=
NHLL C=
r3,HLL= 0.000%
V= 100
NLL C= 4
r2,LL=
V=
NLLL C=
r3,LLL=
Binomial Interest-Rate T
Question: Finding out the one-year's forward rates for year 2 using the three-yea
Assumption
r1,L 4.07%
Given
Sigma 10%
N
l Interest-Rate Tree for 3 years
V=
NHHH C= 4.5
r3,HHH= 0.000%
V= 100
NHH C= 4.5
r2,HL= 0.000%
V=
NHHL C= 4.5
r3,HHL= 0.000%
V= 100
NHL C= 4.5
r2,HL= 0.000%
V=
NHLL C= 4.5
r3,HLL= 0.000%
V= 100
NLL C= 4.5
r2,LL=
V=
NLLL C= 4.5
r3,LLL=