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Extensions Of Simple Binomial Option Pricing Models To Interest Rates And Credit Risk

In: Derivatives, Risk Management & Value

Author

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  • Mondher Bellalah

    (Université de Cergy-Pontoise, France)

Abstract

The 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

Suggested Citation

  • Mondher Bellalah, 2009. "Extensions Of Simple Binomial Option Pricing Models To Interest Rates And Credit Risk," World Scientific Book Chapters, in: Derivatives, Risk Management & Value, chapter 6, pages 293-326, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812838636_0006
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