Term Structure Lattice

r(0,0)
6.00%
u
1.25
d
0.9
q
0.50
1-q
0.50

Short-Rate Lattice
0
5
4
3
2
1
0

6.00%

7.50%
5.40%

4-Year Zero-Coupon Bond

0
1
5
4
3
2
1
79.27
0
77.22
84.43

9.38%
6.75%
4.86%

11.72%
8.44%
6.08%
4.37%

14.65%
10.55%
7.59%
5.47%
3.94%

83.08
87.35
90.64

89.51
92.22
94.27
95.81

100.00
100.00
100.00
100.00
100.00

American Zero Option Value

Expiration
3
Strike
88.00
Option type
-1

3
2
1
0

10.78

8.73
3.57

4.92
0.65
0.00

3
0.00
0.00
0.00
0.00

5
18.31%
13.18%
9.49%
6.83%
4.92%
3.54%

European Zero Option Value

Expiration
2
Strike
84.00
Option type
1

2
1
0

2.97

1.56
4.74

2
0.00
3.35
6.64

Term Structure Lattice

r(0,0)
6.00%
u
1.25
d
0.9
q
0.50
1-q
0.50

Short-Rate Lattice
0
5
4
3
2
1
0

6.00%

7.50%
5.40%

9.38%
6.75%
4.86%

11.72%
8.44%
6.08%
4.37%

14.65%
10.55%
7.59%
5.47%
3.94%

5
18.31%
13.18%
9.49%
6.83%
4.92%
3.54%

115.83
126.14

108.98
118.55
126.27

104.03
112.49
119.27
124.57

101.66
108.44
113.83
118.00
121.16

102.98
107.19
110.46
112.96
114.84
116.24

79.99
89.24

81.53
90.45
97.67

85.08
93.27
99.85
104.99

6-Year 10% Coupon Bond

0
6
5
4
3
2
1
0

124.14

A Bond Forward
Coupon
10.0%
Maturity
4
0
4
3
2
1
0
Bond Forward Price

79.83

103.38

4
91.66
98.44
103.83
108.00
111.16

6
110.00
110.00
110.00
110.00
110.00
110.00
110.00

4-Year Zero-Coupon Bond

0
5
4
3
2
1
0
77.22

79.27
84.43

83.08
87.35
90.64

89.51
92.22
94.27
95.81

100.00
100.00
100.00
100.00
100.00

100.81
105.64

98.09
103.52
107.75

95.05
101.14
105.91
109.58

A Bond Future
Coupon
10.0%
Maturity
4
0
4
3
2
1
0

103.22

Bond Futures Price

103.22

4
91.66
98.44
103.83
108.00
111.16

Term Structure Lattice

r(0,0)
6.00%
u
1.25
d
0.9
q
0.50
1-q
0.50

Short-Rate Lattice
0
5
4
3
2
1
0

6.00%

Fixed Rate
Caplet With Expiration t = 6

7.50%
5.40%

9.38%
6.75%
4.86%

11.72%
8.44%
6.08%
4.37%

14.65%
10.55%
7.59%
5.47%
3.94%

0.0637
0.0471
0.0323

0.0800
0.0592
0.0412
0.0264

0.1032
0.0756
0.0528
0.0346
0.0206

5
18.31%
13.18%
9.49%
6.83%
4.92%
3.54%

2.0%

0
5
4
3
2
1
0

0.0420

0.0515
0.0376

5
0.1379
0.0988
0.0684
0.0453
0.0278
0.0149

Term Structure Lattice

r(0,0)
6.00%
u
1.25
d
0.9
q
0.50
1-q
0.50

Short-Rate Lattice
0
5
4
3
2
1
0

6.00%

Fixed Rate
Swap With Expiration t = 6

7.50%
5.40%

0.0990

Swaption Strike
Swaption: Expiration t = 3

3
2
1
0

9.38%
6.75%
4.86%

11.72%
8.44%
6.08%
4.37%

14.65%
10.55%
7.59%
5.47%
3.94%

0.1686
0.0829
0.0137

0.1793
0.1021
0.0400
-0.0085

0.1648
0.1014
0.0512
0.0122
-0.0174

5
18.31%
13.18%
9.49%
6.83%
4.92%
3.54%

5.0%

0
5
4
3
2
1
0

0.1403
0.0496

0%

0.0620

0.0908
0.0406

0.1286
0.0665
0.0191

3
0.1793
0.1021
0.0400
0.0000

5
0.1125
0.0723
0.0410
0.0172
-0.0008
-0.0141

Term Structure Lattice

r(0,0)
6.00%
u
1.25
d
0.9
q
0.50
1-q
0.50

Short-Rate Lattice
0
5
4
3
2
1
0

6.00%

7.50%
5.40%

9.38%
6.75%
4.86%

11.72%
8.44%
6.08%
4.37%

14.65%
10.55%
7.59%
5.47%
3.94%

5
18.31%
13.18%
9.49%
6.83%
4.92%
3.54%

0.0449
0.1868
0.2901
0.1992
0.0511

0.0196
0.1041
0.2193
0.2293
0.1190
0.0246

6
0.0083
0.0543
0.1461
0.2075
0.1640
0.0686
0.0119

77.22
6.68%

71.59
6.91%

66.06
7.15%

Elementary Prices
6
5
4
3
2
1
0

1.0000

Zero Coupon Bond Prices

Spot Rates

0.4717
0.4717

0.2194
0.4432
0.2238

0.1003
0.3079
0.3143
0.1067

94.34
6.00%

88.63
6.22%

82.91
6.45%