Construct an = = 10-period binomial model for the short-rate, r'į,j (i=0,1,2...9). The lattice parameters are: r0,0 = 5%

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Construct An 10 Period Binomial Model For The Short Rate R I J I 0 1 2 9 The Lattice Parameters Are R0 0 5 1 (60.68 KiB) Viewed 20 times

Construct an = = 10-period binomial model for the short-rate, r'į,j (i=0,1,2...9). The lattice parameters are: r0,0 = 5%, u = 1.1, d = 0.9 and q = 1− q = 1/2. This is the same lattice that you constructed in Assignment 5. Assume that the 1-step hazard rate in node (i, j) is given by hij ab- where a = Compute the price of a zero-coupon bond with face value F = 100 and recovery R = 20%. = = 0.01 and b = 1.01.