EXTENSIONS OF SIMPLE BINOMIAL OPTION PRICING MODELS TO INTEREST RATES AND CREDIT RISK

Mondher Bellalah
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Mondher Bellalah: Université de Cergy-Pontoise, France

Chapter 6 in Derivatives, Risk Management & Value, 2009, pp 293-326 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractThe following sections are included:Chapter OutlineIntroductionThe Rendleman and Bartter Model (for details, refer to Bellalah et al., 1998) for Interest-Rate Sensitive InstrumentsUsing the model for coupon-paying bondsHo and Lee Model for Interest Rates and Bond OptionsThe binomial dynamics of the term structureThe binomial dynamics of bond pricesComputation of bond prices in the Ho and Lee modelOption pricing in the Ho and Lee modelDeficiency in the Ho and Lee modelBinomial Interest-Rate Trees and the Log-Normal Random WalkThe Black-Derman-Toy Model (BDT)Examples and applicationsTrinomial Interest-Rate Trees and the Pricing of BondsThe modelApplications of the binomial and trinomial modelsSummaryQuestionsAppendix A: Ho and Lee model and binomial dynamics of bond pricesReferences

Keywords: Options; Forwards; Futures; Valuation; Hedging; Arbitrage; Speculation; Pricing (search for similar items in EconPapers)
Date: 2009
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