{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Assign2

# Assign2 - a forward interest rate and is supposed to be...

This preview shows page 1. Sign up to view the full content.

STAT/ACTSC 446/846 Assignment #2 (due October 12, 2007) Note: When handing in your assignment, please use a cover page showing only your UWID number and section (lecture) number. Please write your name on the first actual page of your assignment. ACTSC/STAT 846 students: please indicate on the cover page that you are a graduate student by writing “846”. Problems from the textbook Derivatives Markets, 2nd Edition, R.L. McDonald : Part I: Introduction to derivatives 3) No-arbitrage principle and Pricing of simple derivatives [Ch 9] Chapter 9: ex 9.3 and ex 9.9 4) Swaps [Ch 7.1 and Ch 8] Remark: Section 7.1 (Bond basics) corresponds to the definition of a Zero-coupon bond and of
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: a forward interest rate and is supposed to be already known. Chapter 7: ex 7.3 and ex 7.8 (but use an interest rate of 4% instead of 5%) Chapter 8: ex 8.2 and ex 8.5 Part II: Binomial Model Chapter 10: ex 10.6 (but use n = 4 instead of n = 2), ex 10.7 (use n = 4 instead of n = 2: also, it can be useful to use an Excel spreadsheet for this problem), ex 10.12 (take δ = 3% instead of δ = 0, n = 3 instead of n = 2, and T = 1 year instead of 0.5 year). Chapter 11: ex 11.9 (you will also need an Excel spreadsheet), it is suﬃcient to report only the ﬁrst two of the 10 nodes....
View Full Document

{[ snackBarMessage ]}