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- 2011-7-2
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2#
发表于 2011-7-11 19:41
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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).
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