SIOM FIN 305 – Evaluate the following statements
Evaluate the following statements:(c) If the binomial tree is correctly calibrated, it should give the same value for an option free bond as using the spot curve (par curve) used to calibrate the tree. (5 marks)(e) Zero coupon bonds (ZCB) have duration equals to its maturity. Hence, ZCBâs price sensitivity to interest rate change is the same regardless of the interest rates level. (5 marks)
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