Guys urgent helped required has to do with reading 44 valuation and analysis as of bonds with embedded options
Exhibit :26
effectively my question is how are we arriving at the value at the lower node of the interest rate tree for a given volatility I know it is derived from exhibit 1 which is not a problem and will be approximated by the one-year forward rate but how do we get to the specific value say in Exhibit 26 lower node at year 1 at rate of 3.1681 and at the rate of 3.7041 at second 2
i know how to populate the nodes above that respectively for the respective years:
how do we go from indicate the one-year forward rate one year from now is 3.518 and one-year forward rate two years from now is 4.564 can somebody please clarify how the lower node rate is arrived from this forward rate.
Exhibit :26
effectively my question is how are we arriving at the value at the lower node of the interest rate tree for a given volatility I know it is derived from exhibit 1 which is not a problem and will be approximated by the one-year forward rate but how do we get to the specific value say in Exhibit 26 lower node at year 1 at rate of 3.1681 and at the rate of 3.7041 at second 2
i know how to populate the nodes above that respectively for the respective years:
how do we go from indicate the one-year forward rate one year from now is 3.518 and one-year forward rate two years from now is 4.564 can somebody please clarify how the lower node rate is arrived from this forward rate.