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Bond Valuation Model
Bond Valuation Model
Bond Valuation Model
BOND VALUATION
WITH EMBEDDED
OPTIONS
APOLINAR, WILLIANE FAITH
CASTRO, JOYCE
DERILO, NJ SIBBALUCA
OROTEA, STEPHANIE
LATTICE MODEL
It's an idea that a current value of stock, commodities or interest rate may change to
one of the two possible options, whether it is an up move or down move value over the
derivative time.
A lattice-based model is used to value derivatives, which are financial instruments that
derive their price from an underlying asset. Assumes that the underlying asset(i.e.
Stock) can move up or down
Lattice models employ binomial trees to show the different paths the price of an
underlying asset might take over the derivative's life.
MONTE CARLO
:
Check Excel file for calculation
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REFERENCES:
https://youtu.be/JeY4Bq1F-8Q
https://www.investopedia.com/terms/l/lattice-model.asp
https://www.investopedia.com/terms/m/montecarlosimulation.asp
https://www.youtube.com/watch?v=zrqI-NbZSj0