{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

AssignmentThree - ActSc 445/845 Fall 2010 Assignment 3 Due...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
ActSc 445/845 Fall 2010 Assignment 3 Due Date: November 16, 2010 (in class) Note: 445 students can work in teams of two for this assignment. No team of three is allowed. A drop-box on UW-ACE will be created where you will be asked to provide your computer files (Excel spreadsheet, R/Matlab programs, etc.) for the assignment. Further instructions on what to hand in and how to let us know who the team members are will be posted later on. 1. 6% 5% 7% 4% 6% 8% 3% 5% 7% 9% year 0 year 1 year 2 year 3 Short Rate Binomial Lattice q ( t, n ) = 0 . 5 Answer the following parts based on the above (riskless) short rate lattice: (a) Compute the implied 1-year, 2-year and 3-year spot rates. (b) Use backward recursion to price a 4-year coupon bond with 100 face value and annual coupon rate of 6% payable annually. (c) Use backward recursion to price a 2-year floor with floor rate 6% payable in advance, $1,000 notional amount and reset annually. (d) Compute the Arrow-Debreu prices A ( t, n ) , t = 0 , . . . , 3 , n = 0 , . . . , t .
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern