In a healthy adult, approximately 60% of total body weight i…
In a healthy adult, approximately 60% of total body weight is made up of
In a healthy adult, approximately 60% of total body weight i…
Questions
In а heаlthy аdult, apprоximately 60% оf tоtal body weight is made up of
The semi-аnnuаlly cоmpоunded risk-neutrаl tree оf the calibrated to the Treasury yield curve BDT model is ir-tree.png with risk-neutral probabilities moving up and down being 50% and the time interval between the period to be 6 months, i.e. ∆ = 0.5. This three is recombining, that is: r 2 , u d = r 2 , d u r 3 , u u d = r 3 , u d u = r 3 , d u u and r 3 , d d u = r 3 , d u d = r 3 , u d d Answer the following questions. Please write your answers on the paper provided by the proctors. (a) 2pts What is the model predicted price at i = 0 of a 1y zero coupon bond (ZCB) with a face value $100, i.e., the bond that matures at i = 2 step of the tree? (b) 2pts What is the model predicted price at i = 1 of a 1y zero coupon bond (ZCB) with a face value $100, i.e., the bond that matures at i = 3 step of the tree? Provide answers for (1, u) and (1, d) nodes. (c) 2pts What is the model predicted price at i = 2 of a 1y zero coupon bond (ZCB) with a face value $100, i.e., the bond that matures at i = 4 step of the tree? Provide answers for (2, uu), (2, ud) and (2, dd) nodes. (d) Suppose that you have an option with maturity 1y that allows you to buy a 1y ZCB with a face value of $100 at the price of $98. That is, whenever you exercise the option you will receive a zero coupon bond with maturity of 1y and will have to pay $98. The option can be exercised either now, or in 6 months, or at maturity. (i) 2pts What is the value of this option at i = 2, i.e., at maturity? Provide answers for (2, uu), (2, ud) and (2, dd) nodes. In which of the nodes would you exercise the option? (ii) 4pts What is the value of this option at i = 1, i.e., in 6 months? Provide answers for (1, u) and (1, d) nodes. In which of the nodes would you exercise the option? (iii) 4pts What is the value of this option at i = 0, i.e., now? Is it optimal to exercise the option now?