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发帖数: 165 | 1 how to value a derivative pay off 100R in five years, where R is the 1 year
interest rate observed in 4 years. What about pay off in 4 year? 6 year?
The answer is:
5 year: 100R_0*P(0,5)
4 year need convex adjustment: 100(R_0+c)P(0,4)
6 year: 100(R_0-c)P(0,4)
somebody explain the convex adjustment? Thx! |
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