You are given the following interest rate tree. Use it when required in the
exercises.
-Using risk neutral pricing obtain the value for a put option on a 1.5 year zero coupon bond with K = 97.40, maturity at t = 1. Assume that p? = 0.7038 is constant over time.

Question

You are given the following interest rate tree. Use it when required in the
exercises. 
-Using risk neutral pricing obtain the value for a put option on a 1.5 year zero coupon bond with K = 97.40, maturity at t = 1. Assume that p? = 0.7038 is constant over time.

Quizplus · Accepted Answer

The Answer is The price is 0.1709.

You Are Given the Following Interest Rate Tree