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Black–Derman–Toy model

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Step 2. Once solved, retain these known short rates, and proceed to the next time-step (i.e. input spot-rate), "growing" the tree until it incorporates the full input yield-curve.
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discount recursively through the tree using the rate at each node, i.e. via "backwards induction", from the time-step in question to the first node in the tree (i.e. i=0);
625: 1912: 594: 555: 2515: 1508: 945: 465: 761: 2045: 2025: 288:-prices for each component caplet); see aside. Using the calibrated lattice one can then value a variety of more complex interest-rate sensitive securities and 2429: 1462: 2346: 2356: 2030: 1468: 997: 2040: 2398: 2113: 2295: 2585: 2575: 2098: 1075: 2485: 2449: 2402: 2753: 2490: 1398: 1600: 1501: 1393: 66: 2555: 2133: 2103: 2406: 2390: 971: 2600: 2305: 1525: 296: 2505: 2470: 2439: 2434: 1870: 1787: 733: 2444: 1772: 2779: 2068: 1875: 1388: 1264: 890: 633: 261: 1794: 2530: 2410: 2758: 2535: 2371: 2270: 2255: 1667: 1583: 1494: 2545: 2181: 305: 295:
Although initially developed for a lattice-based environment, the model has been shown to imply the following continuous
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factor—the short rate—determines the future evolution of all interest rates. It was the first model to combine the
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find all other rates in the time-step, where these are linked to the node immediately above (r
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in 1990. A personal account of the development of the model is provided in Emanuel Derman's
186: 155: 2705: 2605: 2590: 2351: 2285: 1963: 1907: 1890: 1635: 1441: 1431: 1234: 1224: 1219: 1148: 558: 2520: 1752: 449: 810:"Society of Actuaries Professional Actuarial Specialty Guide Asset-Liability Management" 148:(this node-spacing being consistent with p = 50%; Δt being the length of the time-step); 2710: 2675: 2595: 2201: 1948: 1865: 1834: 1829: 1809: 1799: 1742: 1737: 1717: 1697: 1662: 1630: 1613: 1342: 1327: 1292: 1279: 1254: 1158: 1126: 1095: 982: 230: 2773: 2612: 2153: 1990: 1985: 1943: 1885: 1707: 1623: 1563: 1446: 1421: 1332: 1317: 1307: 1259: 1199: 1189: 717: 234: 226: 159: 2670: 2632: 2186: 2118: 2007: 2002: 1814: 1747: 1722: 1558: 1357: 1302: 1249: 1179: 1105: 967: 946:"A One-Factor Model of Interest Rates and Its Application to Treasury Bond Options" 886: 797: 265: 2250: 762:"Impact of Different Interest Rate Models on Bond Value Measures, G, Buetow et al" 1023: 2715: 2234: 2229: 2224: 2214: 2017: 1958: 1953: 1917: 1677: 1568: 1413: 1352: 1312: 1287: 1163: 1131: 1121: 1084: 1003:. Technical Note No. 23, Options, Futures, and Other Derivatives. Archived from 269: 190: 268:
the model parameters to fit both the current term structure of interest rates (
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repeat until the discounted value at the first node in the tree equals the
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Generalized autoregressive conditional heteroskedasticity (GARCH) model
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One reason that the model remains popular, is that the "standard"
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adjust the rate at the top-most node at the current time-step, i;
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Calibrating the Black–Derman-Toy model: some theoretical results
141:{\displaystyle \ln(r_{u}/r_{d})/2=\sigma _{i}{\sqrt {\Delta t}}} 1490: 1057: 1053: 1042:
R function for computing the Black–Derman–Toy short rate tree
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Autoregressive conditional heteroskedasticity (ARCH) model
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Independent and identically distributed random variables
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Black, F.; Derman, E.; Toy, W. (January–February 1990).
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Lattice model (finance) § Interest rate derivatives
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For constant (time independent) short rate volatility,
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Autoregressive integrated moving average (ARIMA) model
1029:. Seminar Financial Engineering, University of Vienna. 26: 1475:
Securities Industry and Financial Markets Association
636: 612: 571: 535: 505: 475: 452: 308: 69: 2653: 2458: 2420: 2329: 2243: 2200: 2167: 2059: 2016: 1926: 1843: 1599: 1524: 1455: 1412: 1376: 1278: 1172: 1114: 1024:"Implementation of the Black, Derman and Toy Model" 431:{\displaystyle d\ln(r)=\leftdt+\sigma _{t}\,dW_{t}} 697: 619: 588: 549: 519: 489: 459: 430: 140: 1913:Stochastic chains with memory of variable length 497:= value of the underlying asset at option expiry 893:, Applied Mathematical Finance 8, 27– 48 (2001) 205:. It is a one-factor model; that is, a single 1502: 1069: 8: 2041:Autoregressive–moving-average (ARMA) model 1509: 1495: 1487: 1463:Commercial Mortgage Securities Association 1076: 1062: 1054: 689: 681: 668: 662: 635: 616: 611: 585: 579: 570: 546: 540: 534: 516: 510: 504: 486: 480: 474: 456: 451: 422: 414: 408: 367: 354: 348: 339: 307: 128: 122: 107: 98: 89: 83: 68: 1469:International Capital Market Association 889:, Ken Seng Tan and Weidong Tian (2001). 756: 754: 467:= the instantaneous short rate at time t 1048:Excel BDT calculator and tree generator 750: 2347:Doob's martingale convergence theorems 237:in the 1980s and was published in the 31:Short-rate tree calibration under BDT: 2099:Constant elasticity of variance (CEV) 2089:Chan–Karolyi–Longstaff–Sanders (CKLS) 937:Mathematica in Education and Research 213:behaviour of the short rate with the 7: 1399:Commercial mortgage-backed security 2586:Skorokhod's representation theorem 2367:Law of large numbers (weak/strong) 1394:Collateralized mortgage obligation 998:"The Black, Derman, and Toy Model" 130: 25: 2556:Martingale representation theorem 928:Benninga, S.; Wiener, Z. (1998). 2601:Stochastic differential equation 2491:Doob's optional stopping theorem 2486:Doob–Meyer decomposition theorem 930:"Binomial Term Structure Models" 297:stochastic differential equation 63:being the node in question) via 2471:Convergence of random variables 2357:Fisher–Tippett–Gnedenko theorem 527:= instant short rate volatility 2069:Binomial options pricing model 1389:Collateralized debt obligation 1265:Reverse convertible securities 652: 646: 387: 381: 324: 318: 217:, and is still widely used. 104: 76: 1: 2536:Kolmogorov continuity theorem 2372:Law of the iterated logarithm 520:{\displaystyle \sigma _{t}\,} 490:{\displaystyle \theta _{t}\,} 2541:Kolmogorov extension theorem 2220:Generalized queueing network 1728:Interacting particle systems 1022:Klose, C.; Li C. Y. (2003). 979:Applied Mathematical Finance 970:; Tan, K.; Tian, W. (2001). 225:The model was introduced by 1673:Continuous-time random walk 1205:Contingent convertible bond 158:corresponding to the given 2811: 2681:Extreme value theory (EVT) 2481:Doob decomposition theorem 1773:Ornstein–Uhlenbeck process 1544:Chinese restaurant process 1245:Inverse floating rate note 981:: 8, 27–48. Archived from 953:Financial Analysts Journal 240:Financial Analysts Journal 2749: 2561:Optional stopping theorem 2362:Large deviation principle 2114:Heath–Jarrow–Morton (HJM) 2051:Moving-average (MA) model 2036:Autoregressive (AR) model 1861:Hidden Markov model (HMM) 1795:Schramm–Loewner evolution 1091: 620:{\displaystyle \sigma \,} 290:interest rate derivatives 199:interest rate derivatives 2476:Doléans-Dade exponential 2306:Progressively measurable 2104:Cox–Ingersoll–Ross (CIR) 1404:Mortgage-backed security 1173:Types of bonds by payout 1115:Types of bonds by issuer 863:"Black-Derman-Toy (BDT)" 728:language, and not using 589:{\displaystyle dW_{t}\,} 38:of an up move, p, to 50% 36:risk-neutral probability 2696:Mathematical statistics 2686:Large deviations theory 2516:Infinitesimal generator 2377:Maximal ergodic theorem 2296:Piecewise-deterministic 1898:Random dynamical system 1763:Markov additive process 955:: 24–32. Archived from 710:Root-finding algorithms 550:{\displaystyle W_{t}\,} 215:log-normal distribution 189:used in the pricing of 162:for the i-th time-step. 40:Step 1. For each input 2531:Karhunen–Loève theorem 2466:Cameron–Martin formula 2430:Burkholder–Davis–Gundy 1825:Variance gamma process 1338:Option-adjusted spread 1240:Inflation-indexed bond 699: 621: 590: 551: 521: 491: 461: 432: 179:Black–Derman–Toy model 142: 2780:Fixed income analysis 2661:Actuarial mathematics 2623:Uniform integrability 2618:Stratonovich integral 2546:Lévy–Prokhorov metric 2450:Marcinkiewicz–Zygmund 2337:Central limit theorem 1939:Gaussian random field 1768:McKean–Vlasov process 1688:Dyson Brownian motion 1549:Galton–Watson process 1384:Asset-backed security 1348:Weighted-average life 1185:Auction rate security 793:Fixed Income Analysis 700: 622: 591: 565:probability measure; 552: 522: 492: 462: 433: 143: 2736:Time series analysis 2691:Mathematical finance 2576:Reflection principle 1903:Regenerative process 1703:Fleming–Viot process 1518:Stochastic processes 1377:Securitized products 634: 610: 569: 533: 503: 473: 450: 306: 274:volatility structure 175:mathematical finance 67: 2731:Stochastic analysis 2571:Quadratic variation 2566:Prokhorov's theorem 2501:Feynman–Kac formula 1971:Markov random field 1619:Birth–death process 1154:Infrastructure bond 730:stochastic calculus 460:{\displaystyle r\,} 362: 260:Under BDT, using a 2701:Probability theory 2581:Skorokhod integral 2551:Malliavin calculus 2134:Korn-Kreer-Lenssen 2018:Time series models 1981:Pitman–Yor process 1230:Floating rate note 695: 617: 586: 547: 517: 487: 457: 428: 350: 278:interest rate caps 249:My Life as a Quant 160:spot interest rate 138: 2795:Options (finance) 2785:Short-rate models 2767: 2766: 2721:Signal processing 2440:Doob's upcrossing 2435:Doob's martingale 2399:Engelbert–Schmidt 2342:Donsker's theorem 2276:Feller-continuous 2144:Rendleman–Bartter 1934:Dirichlet process 1851:Branching process 1820:Telegraph process 1713:Geometric process 1693:Empirical process 1683:Diffusion process 1539:Branching process 1534:Bernoulli process 1484: 1483: 1437:Exchangeable bond 1363:Yield to maturity 1215:Exchangeable bond 1137:Subordinated debt 373: 171: 170: 136: 16:(Redirected from 2802: 2790:Financial models 2741:Machine learning 2628:Usual hypotheses 2511:Girsanov theorem 2496:Dynkin's formula 2261:Continuous paths 2169:Actuarial models 2109:Garman–Kohlhagen 2079:Black–Karasinski 2074:Black–Derman–Toy 2061:Financial models 1927:Fields and other 1856:Gaussian process 1805:Sigma-martingale 1609:Additive process 1511: 1504: 1497: 1488: 1427:Convertible bond 1270:Zero-coupon bond 1210:Convertible bond 1195:Commercial paper 1078: 1071: 1064: 1055: 1044:, Andrea Ruberto 1030: 1028: 1018: 1016: 1015: 1009: 1002: 989: 987: 976: 963: 961: 950: 940: 934: 914: 913: 911: 910: 900: 894: 884: 878: 877: 875: 874: 865:. Archived from 859: 853: 852: 850: 849: 840:. Archived from 834: 828: 827: 825: 823: 814: 806: 800: 789: 783: 782: 780: 779: 773: 767:. Archived from 766: 758: 704: 702: 701: 696: 694: 693: 667: 666: 627:, the model is: 626: 624: 623: 618: 595: 593: 592: 587: 584: 583: 556: 554: 553: 548: 545: 544: 526: 524: 523: 518: 515: 514: 496: 494: 493: 488: 485: 484: 466: 464: 463: 458: 437: 435: 434: 429: 427: 426: 413: 412: 394: 390: 374: 372: 371: 358: 349: 344: 343: 262:binomial lattice 187:short-rate model 147: 145: 144: 139: 137: 129: 127: 126: 111: 103: 102: 93: 88: 87: 34:Step 0. Set the 27: 21: 2810: 2809: 2805: 2804: 2803: 2801: 2800: 2799: 2770: 2769: 2768: 2763: 2745: 2706:Queueing theory 2649: 2591:Skorokhod space 2454: 2445:Kunita–Watanabe 2416: 2382:Sanov's theorem 2352:Ergodic theorem 2325: 2321:Time-reversible 2239: 2202:Queueing models 2196: 2192:Sparre–Anderson 2182:Cramér–Lundberg 2163: 2149:SABR volatility 2055: 2012: 1964:Boolean network 1922: 1908:Renewal process 1839: 1788:Non-homogeneous 1778:Poisson process 1668:Contact process 1631:Brownian motion 1601:Continuous time 1595: 1589:Maximal entropy 1520: 1515: 1485: 1480: 1451: 1442:Extendible bond 1432:Embedded option 1408: 1372: 1274: 1235:High-yield debt 1225:Fixed rate bond 1220:Extendible bond 1168: 1149:Government bond 1144:Distressed debt 1110: 1087: 1082: 1038: 1033: 1026: 1021: 1013: 1011: 1007: 1000: 992: 985: 974: 966: 959: 948: 943: 932: 927: 918: 917: 908: 906: 902: 901: 897: 885: 881: 872: 870: 861: 860: 856: 847: 845: 836: 835: 831: 821: 819: 812: 808: 807: 803: 790: 786: 777: 775: 771: 764: 760: 759: 752: 742: 714:Newton's method 685: 658: 632: 631: 608: 607: 575: 567: 566: 559:Brownian motion 536: 531: 530: 506: 501: 500: 476: 471: 470: 448: 447: 418: 404: 363: 335: 334: 330: 304: 303: 258: 223: 185:) is a popular 118: 94: 79: 65: 64: 62: 58: 39: 23: 22: 15: 12: 11: 5: 2808: 2806: 2798: 2797: 2792: 2787: 2782: 2772: 2771: 2765: 2764: 2762: 2761: 2756: 2754:List of topics 2750: 2747: 2746: 2744: 2743: 2738: 2733: 2728: 2723: 2718: 2713: 2711:Renewal theory 2708: 2703: 2698: 2693: 2688: 2683: 2678: 2676:Ergodic theory 2673: 2668: 2666:Control theory 2663: 2657: 2655: 2651: 2650: 2648: 2647: 2646: 2645: 2640: 2630: 2625: 2620: 2615: 2610: 2609: 2608: 2598: 2596:Snell envelope 2593: 2588: 2583: 2578: 2573: 2568: 2563: 2558: 2553: 2548: 2543: 2538: 2533: 2528: 2523: 2518: 2513: 2508: 2503: 2498: 2493: 2488: 2483: 2478: 2473: 2468: 2462: 2460: 2456: 2455: 2453: 2452: 2447: 2442: 2437: 2432: 2426: 2424: 2418: 2417: 2415: 2414: 2395:Borel–Cantelli 2384: 2379: 2374: 2369: 2364: 2359: 2354: 2349: 2344: 2339: 2333: 2331: 2330:Limit theorems 2327: 2326: 2324: 2323: 2318: 2313: 2308: 2303: 2298: 2293: 2288: 2283: 2278: 2273: 2268: 2263: 2258: 2253: 2247: 2245: 2241: 2240: 2238: 2237: 2232: 2227: 2222: 2217: 2212: 2206: 2204: 2198: 2197: 2195: 2194: 2189: 2184: 2179: 2173: 2171: 2165: 2164: 2162: 2161: 2156: 2151: 2146: 2141: 2136: 2131: 2126: 2121: 2116: 2111: 2106: 2101: 2096: 2091: 2086: 2081: 2076: 2071: 2065: 2063: 2057: 2056: 2054: 2053: 2048: 2043: 2038: 2033: 2028: 2022: 2020: 2014: 2013: 2011: 2010: 2005: 2000: 1999: 1998: 1993: 1983: 1978: 1973: 1968: 1967: 1966: 1961: 1951: 1949:Hopfield model 1946: 1941: 1936: 1930: 1928: 1924: 1923: 1921: 1920: 1915: 1910: 1905: 1900: 1895: 1894: 1893: 1888: 1883: 1878: 1868: 1866:Markov process 1863: 1858: 1853: 1847: 1845: 1841: 1840: 1838: 1837: 1835:Wiener sausage 1832: 1830:Wiener process 1827: 1822: 1817: 1812: 1810:Stable process 1807: 1802: 1800:Semimartingale 1797: 1792: 1791: 1790: 1785: 1775: 1770: 1765: 1760: 1755: 1750: 1745: 1743:Jump diffusion 1740: 1735: 1730: 1725: 1720: 1718:Hawkes process 1715: 1710: 1705: 1700: 1698:Feller process 1695: 1690: 1685: 1680: 1675: 1670: 1665: 1663:Cauchy process 1660: 1659: 1658: 1653: 1648: 1643: 1638: 1628: 1627: 1626: 1616: 1614:Bessel process 1611: 1605: 1603: 1597: 1596: 1594: 1593: 1592: 1591: 1586: 1581: 1576: 1566: 1561: 1556: 1551: 1546: 1541: 1536: 1530: 1528: 1522: 1521: 1516: 1514: 1513: 1506: 1499: 1491: 1482: 1481: 1479: 1478: 1472: 1466: 1459: 1457: 1453: 1452: 1450: 1449: 1444: 1439: 1434: 1429: 1424: 1418: 1416: 1410: 1409: 1407: 1406: 1401: 1396: 1391: 1386: 1380: 1378: 1374: 1373: 1371: 1370: 1365: 1360: 1355: 1350: 1345: 1343:Risk-free bond 1340: 1335: 1330: 1328:Mortgage yield 1325: 1320: 1315: 1310: 1305: 1300: 1295: 1290: 1284: 1282: 1280:Bond valuation 1276: 1275: 1273: 1272: 1267: 1262: 1257: 1255:Perpetual bond 1252: 1247: 1242: 1237: 1232: 1227: 1222: 1217: 1212: 1207: 1202: 1197: 1192: 1187: 1182: 1176: 1174: 1170: 1169: 1167: 1166: 1161: 1159:Municipal bond 1156: 1151: 1146: 1141: 1140: 1139: 1134: 1127:Corporate bond 1124: 1118: 1116: 1112: 1111: 1109: 1108: 1103: 1098: 1092: 1089: 1088: 1083: 1081: 1080: 1073: 1066: 1058: 1052: 1051: 1045: 1037: 1036:External links 1034: 1032: 1031: 1019: 990: 988:on 2012-04-22. 964: 962:on 2008-09-10. 941: 939:: vol.7 No. 3. 919: 916: 915: 895: 879: 854: 829: 801: 784: 749: 748: 741: 738: 706: 705: 692: 688: 684: 680: 677: 674: 671: 665: 661: 657: 654: 651: 648: 645: 642: 639: 615: 604: 603: 602: 601: 582: 578: 574: 543: 539: 528: 513: 509: 498: 483: 479: 468: 455: 445: 439: 438: 425: 421: 417: 411: 407: 403: 400: 397: 393: 389: 386: 383: 380: 377: 370: 366: 361: 357: 353: 347: 342: 338: 333: 329: 326: 323: 320: 317: 314: 311: 257: 254: 231:Emanuel Derman 222: 219: 211:mean-reverting 169: 168: 164: 163: 152: 149: 135: 132: 125: 121: 117: 114: 110: 106: 101: 97: 92: 86: 82: 78: 75: 72: 60: 56: 53: 24: 14: 13: 10: 9: 6: 4: 3: 2: 2807: 2796: 2793: 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2365: 2363: 2360: 2358: 2355: 2353: 2350: 2348: 2345: 2343: 2340: 2338: 2335: 2334: 2332: 2328: 2322: 2319: 2317: 2314: 2312: 2309: 2307: 2304: 2302: 2299: 2297: 2294: 2292: 2289: 2287: 2284: 2282: 2279: 2277: 2274: 2272: 2269: 2267: 2264: 2262: 2259: 2257: 2254: 2252: 2249: 2248: 2246: 2242: 2236: 2233: 2231: 2228: 2226: 2223: 2221: 2218: 2216: 2213: 2211: 2208: 2207: 2205: 2203: 2199: 2193: 2190: 2188: 2185: 2183: 2180: 2178: 2175: 2174: 2172: 2170: 2166: 2160: 2157: 2155: 2152: 2150: 2147: 2145: 2142: 2140: 2137: 2135: 2132: 2130: 2127: 2125: 2122: 2120: 2117: 2115: 2112: 2110: 2107: 2105: 2102: 2100: 2097: 2095: 2092: 2090: 2087: 2085: 2084:Black–Scholes 2082: 2080: 2077: 2075: 2072: 2070: 2067: 2066: 2064: 2062: 2058: 2052: 2049: 2047: 2044: 2042: 2039: 2037: 2034: 2032: 2029: 2027: 2024: 2023: 2021: 2019: 2015: 2009: 2006: 2004: 2001: 1997: 1994: 1992: 1989: 1988: 1987: 1986:Point process 1984: 1982: 1979: 1977: 1974: 1972: 1969: 1965: 1962: 1960: 1957: 1956: 1955: 1952: 1950: 1947: 1945: 1944:Gibbs measure 1942: 1940: 1937: 1935: 1932: 1931: 1929: 1925: 1919: 1916: 1914: 1911: 1909: 1906: 1904: 1901: 1899: 1896: 1892: 1889: 1887: 1884: 1882: 1879: 1877: 1874: 1873: 1872: 1869: 1867: 1864: 1862: 1859: 1857: 1854: 1852: 1849: 1848: 1846: 1842: 1836: 1833: 1831: 1828: 1826: 1823: 1821: 1818: 1816: 1813: 1811: 1808: 1806: 1803: 1801: 1798: 1796: 1793: 1789: 1786: 1784: 1781: 1780: 1779: 1776: 1774: 1771: 1769: 1766: 1764: 1761: 1759: 1756: 1754: 1751: 1749: 1746: 1744: 1741: 1739: 1736: 1734: 1733:Itô diffusion 1731: 1729: 1726: 1724: 1721: 1719: 1716: 1714: 1711: 1709: 1708:Gamma process 1706: 1704: 1701: 1699: 1696: 1694: 1691: 1689: 1686: 1684: 1681: 1679: 1676: 1674: 1671: 1669: 1666: 1664: 1661: 1657: 1654: 1652: 1649: 1647: 1644: 1642: 1639: 1637: 1634: 1633: 1632: 1629: 1625: 1622: 1621: 1620: 1617: 1615: 1612: 1610: 1607: 1606: 1604: 1602: 1598: 1590: 1587: 1585: 1582: 1580: 1579:Self-avoiding 1577: 1575: 1572: 1571: 1570: 1567: 1565: 1564:Moran process 1562: 1560: 1557: 1555: 1552: 1550: 1547: 1545: 1542: 1540: 1537: 1535: 1532: 1531: 1529: 1527: 1526:Discrete time 1523: 1519: 1512: 1507: 1505: 1500: 1498: 1493: 1492: 1489: 1476: 1473: 1470: 1467: 1464: 1461: 1460: 1458: 1454: 1448: 1447:Puttable bond 1445: 1443: 1440: 1438: 1435: 1433: 1430: 1428: 1425: 1423: 1422:Callable bond 1420: 1419: 1417: 1415: 1411: 1405: 1402: 1400: 1397: 1395: 1392: 1390: 1387: 1385: 1382: 1381: 1379: 1375: 1369: 1366: 1364: 1361: 1359: 1356: 1354: 1351: 1349: 1346: 1344: 1341: 1339: 1336: 1334: 1333:Nominal yield 1331: 1329: 1326: 1324: 1321: 1319: 1316: 1314: 1311: 1309: 1308:Current yield 1306: 1304: 1303:Credit spread 1301: 1299: 1296: 1294: 1291: 1289: 1286: 1285: 1283: 1281: 1277: 1271: 1268: 1266: 1263: 1261: 1260:Puttable bond 1258: 1256: 1253: 1251: 1248: 1246: 1243: 1241: 1238: 1236: 1233: 1231: 1228: 1226: 1223: 1221: 1218: 1216: 1213: 1211: 1208: 1206: 1203: 1201: 1198: 1196: 1193: 1191: 1190:Callable bond 1188: 1186: 1183: 1181: 1178: 1177: 1175: 1171: 1165: 1162: 1160: 1157: 1155: 1152: 1150: 1147: 1145: 1142: 1138: 1135: 1133: 1130: 1129: 1128: 1125: 1123: 1120: 1119: 1117: 1113: 1107: 1104: 1102: 1099: 1097: 1094: 1093: 1090: 1086: 1079: 1074: 1072: 1067: 1065: 1060: 1059: 1056: 1049: 1046: 1043: 1040: 1039: 1035: 1025: 1020: 1010:on 2011-01-29 1006: 999: 995: 991: 984: 980: 973: 969: 965: 958: 954: 947: 942: 938: 931: 926: 925: 924: 923: 905: 899: 896: 892: 888: 883: 880: 869:on 2016-05-24 868: 864: 858: 855: 844:on 2010-03-28 843: 839: 833: 830: 818: 811: 805: 802: 799: 796:, p. 410, at 795: 794: 788: 785: 774:on 2011-10-07 770: 763: 757: 755: 751: 747: 746: 739: 737: 735: 731: 727: 723: 719: 718:secant method 715: 711: 690: 686: 682: 678: 675: 672: 669: 663: 659: 655: 649: 643: 640: 637: 630: 629: 628: 613: 599: 580: 576: 572: 564: 560: 557:= a standard 541: 537: 529: 511: 507: 499: 481: 477: 469: 453: 446: 443: 442: 441: 440: 423: 419: 415: 409: 405: 401: 398: 395: 391: 384: 378: 375: 368: 364: 359: 355: 351: 345: 340: 336: 331: 327: 321: 315: 312: 309: 302: 301: 300: 298: 293: 291: 287: 283: 279: 275: 271: 267: 263: 255: 253: 251: 250: 246: 242: 241: 236: 235:Goldman Sachs 232: 228: 227:Fischer Black 220: 218: 216: 212: 208: 204: 200: 196: 192: 188: 184: 180: 176: 167: 161: 157: 153: 150: 133: 123: 119: 115: 112: 108: 99: 95: 90: 84: 80: 73: 70: 54: 51: 50: 49: 47: 43: 37: 32: 29: 28: 19: 2671:Econometrics 2633:Wiener space 2521:Itô integral 2422:Inequalities 2311:Self-similar 2281:Gauss–Markov 2271:Exchangeable 2251:Càdlàg paths 2187:Risk process 2139:LIBOR market 2073: 2008:Random graph 2003:Random field 1815:Superprocess 1753:Lévy process 1748:Jump process 1723:Hunt process 1559:Markov chain 1456:Institutions 1414:Bond options 1358:Yield spread 1250:Lottery bond 1180:Accrual bond 1106:Fixed income 1050:, Serkan Gur 1012:. Retrieved 1005:the original 983:the original 978: 957:the original 952: 936: 921: 920: 907:. Retrieved 898: 887:Phelim Boyle 882: 871:. Retrieved 867:the original 857: 846:. Retrieved 842:the original 832: 820:. Retrieved 816: 804: 798:Google Books 791: 787: 776:. Retrieved 769:the original 744: 743: 707: 605: 598:differential 563:risk-neutral 294: 259: 247: 238: 224: 191:bond options 182: 178: 172: 165: 33: 30: 2716:Ruin theory 2654:Disciplines 2526:Itô's lemma 2301:Predictable 1976:Percolation 1959:Potts model 1954:Ising model 1918:White noise 1876:Differences 1738:Itô process 1678:Cox process 1574:Loop-erased 1569:Random walk 1353:Yield curve 1313:Dirty price 1288:Clean price 1164:Global bond 1132:Senior debt 1122:Agency bond 1085:Bond market 734:martingales 726:algorithmic 272:), and the 270:yield curve 46:iteratively 18:William Toy 2774:Categories 2726:Statistics 2506:Filtration 2407:Kolmogorov 2391:Blumenthal 2316:Stationary 2256:Continuous 2244:Properties 2129:Hull–White 1871:Martingale 1758:Local time 1646:Fractional 1624:pure birth 1014:2011-04-08 909:2021-06-09 873:2010-06-14 848:2010-04-26 778:2011-07-21 740:References 282:as implied 266:calibrates 207:stochastic 197:and other 156:zero-price 2638:Classical 1651:Geometric 1641:Excursion 1293:Convexity 1101:Debenture 968:Boyle, P. 722:bisection 712:—such as 679:σ 660:θ 644:⁡ 614:σ 508:σ 478:θ 406:σ 379:⁡ 365:σ 352:σ 337:θ 316:⁡ 280:(usually 195:swaptions 131:Δ 120:σ 74:⁡ 42:spot rate 2759:Category 2643:Abstract 2177:Bühlmann 1783:Compound 1368:Z-spread 1323:I-spread 1318:Duration 996:(2008). 994:Hull, J. 922:Articles 822:19 March 561:under a 360:′ 286:Black-76 256:Formulae 2266:Ergodic 2154:Vašíček 1996:Poisson 1656:Meander 1477:(SIFMA) 817:soa.org 284:by the 221:History 2606:Tanaka 2291:Mixing 2286:Markov 2159:Wilkie 2124:Ho–Lee 2119:Heston 1891:Super- 1636:Bridge 1584:Biased 1471:(ICMA) 1465:(CMSA) 1298:Coupon 1200:Consol 444:where, 264:, one 245:memoir 201:; see 177:, the 2459:Tools 2235:M/M/c 2230:M/M/1 2225:M/G/1 2215:Fluid 1881:Local 1027:(PDF) 1008:(PDF) 1001:(PDF) 986:(PDF) 975:(PDF) 960:(PDF) 949:(PDF) 933:(PDF) 813:(PDF) 772:(PDF) 765:(PDF) 745:Notes 720:) or 716:(the 2411:Lévy 2210:Bulk 2094:Chen 1886:Sub- 1844:Both 1096:Bond 824:2024 596:its 276:for 1991:Cox 732:or 183:BDT 173:In 59:; r 2776:: 2409:, 2405:, 2401:, 2397:, 2393:, 977:. 951:. 935:. 815:. 753:^ 736:. 641:ln 376:ln 313:ln 299:: 292:. 252:. 229:, 193:, 71:ln 48:: 44:, 2413:) 2389:( 1510:e 1503:t 1496:v 1077:e 1070:t 1063:v 1017:. 912:. 876:. 851:. 826:. 781:. 691:t 687:W 683:d 676:+ 673:t 670:d 664:t 656:= 653:) 650:r 647:( 638:d 600:. 581:t 577:W 573:d 542:t 538:W 512:t 482:t 454:r 424:t 420:W 416:d 410:t 402:+ 399:t 396:d 392:] 388:) 385:r 382:( 369:t 356:t 346:+ 341:t 332:[ 328:= 325:) 322:r 319:( 310:d 181:( 134:t 124:i 116:= 113:2 109:/ 105:) 100:d 96:r 91:/ 85:u 81:r 77:( 61:d 57:u 20:)

Index

William Toy
risk-neutral probability
spot rate
iteratively
zero-price
spot interest rate
mathematical finance
short-rate model
bond options
swaptions
interest rate derivatives
Lattice model (finance) § Interest rate derivatives
stochastic
mean-reverting
log-normal distribution
Fischer Black
Emanuel Derman
Goldman Sachs
Financial Analysts Journal
memoir
My Life as a Quant
binomial lattice
calibrates
yield curve
volatility structure
interest rate caps
as implied
Black-76
interest rate derivatives
stochastic differential equation

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