cd05adeb1298eb9e789c1408a1cb3561fc3b8baf.xls
How to Solve the Black-Derman-Toy tree:
1. Set the one year interest rate equal to the yield on a one-year bond
2. Using Solver, set the two rates in the binomial tree at one year to make the 2 yr. bond
YTM and
Black Derman Toy Model
Assume the following initial term structure and volatility information
Maturity
(Years)
YTM (%)
1
2
3
4
5
0.1
0.11
0.12
0.125
0.13
Volatility
Of Yields (%)
0.19
0.18
0.17
0.16
The risk-neutral probability of going up is 50%. Assume
Pricing Interest Rate Derivatives Using
Black-Derman-Toy Short Rate Binomial Tree
Shing Hing Man
http:/lombok.demon.co.uk/financialTap/
13th August, 2011
Abstract
This note describes how to construct a short rate binomial tree fitted to an initial
spot ra
BlackDermanToyModelwithForwardInduction
MMA708 Analytical Finance Jan R. M. Rman
BlackDermonToyModel
withForwardInduction
GROUP MEMBERS
Wei Wang
Maierdan Halifu
Yankai Shao
Division of Applied Mathematics
School of Education, Culture and Communication
Ml
Implementation of the
Black, Derman and Toy Model
Seminar Financial Engineering
o.Univ.-Prof. Dr. Engelbert J. Dockner
University of Vienna
Summer Term 2003
Christoph Klose
Li Chang Yuan
Implementation of the Black, Derman and Toy Model
Page 2
Contents of
Lecture: 2
Course: M339W/M389W - Fin Math for Actuaries
Page: 1 of 4
University of Texas at Austin
Lecture 2
Black-Derman-Toy.
2.1. The Black-Derman-Toy (BDT) Tree. The basic idea of the BDT model is to compute a binomial tree of short-term interest rates
Debt Instruments and Markets
Professor Carpenter
Model Calibration and Hedging
Concepts and Buzzwords
Choosing the Model Parameters
Choosing the Drift Terms to
Match the Current Term
Structure
Hedging the Rate Risk in the
Binomial Model
Model Calibrati