Financial Risk Manager Part 2
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Ho-Lee Model: Time-dependent drift
dr = λₜdt + σdw
r(0) = 4%
Month 1 → 4.661% → Month 2 → 5.305%
↓
3.506% → 4.15%
↓
?
↓
3.506% → 4.15%
↓
?
What is the value of the missing node [2, 0] in this Ho-Lee interest rate tree?
Ho-Lee Model: Time-dependent drift
dr = λₜdt + σdw
r(0) = 4%
Month 1 → 4.661% → Month 2 → 5.305%
↓
3.506% → 4.15%
↓
?
↓
3.506% → 4.15%
↓
?
What is the value of the missing node [2, 0] in this Ho-Lee interest rate tree?
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