标题: ex-coupon and cum-coupon in binomial tree? [打印本页] 作者: MarginofSafety 时间: 2011-7-11 19:41 标题: ex-coupon and cum-coupon in binomial tree?
I must have missed that somewhere, how do you calculate that?
Where do they come up with the value of $110.8571 on page 341 (problem 27 of FI)?作者: mp3bu 时间: 2011-7-11 19:41
ex-coupon, cum coupon is nothing new.
at every point you are provided the par value (e.g. 100$ when you start from the right). -- this is ex-coupon. You are given coupon=5.75$ e.g. 100+5.75=Cum-Coupon.
you discount cum-coupon prices at the interest rate in the previous node.
Method 1:
take average of price at previous node.
add coupon rate.
Method 2:
(or take price+coupon at each node, then average out).
both of these steps are exactly the same.
If you see the tree provided - everywhere Cum-Coupon=ex-coupon+8 (which is coupon).
CP作者: zephyranalyst 时间: 2011-7-11 19:41
you are a great help cpk...I have no idea what threw me off... I'm looking at $102 and +8 and keep wondering where $110 comes from! That was weird!
