Exam 25: Interest Rate and Bond Derivatives

Bonds maturing in 1,2,and 3 years have prices of 0.9020,0.8320,and 0.7620,respectively.What is the price of a put option that expires in 1 year that gives you the right to sell a 1-year bond for a price of 0.9200? Assume σ = 0.18.

A series of 1-year interest rate caplets for 4 years have values of $0.05,$0.07,$0.08,and $0.10,respectively.What is the value of a 3-year interest rate cap?

The price of a bond that matures in 1 year is 103.34,using base 100 pricing.The price of a bond that matures in two years is 101.90,using base 100 pricing.What is the 1-year bond forward price in year 1?

What is calibration?

Assume a = 0.15,b = 0.08,r = 0.05,and 0.30.Using the CIR model,calculate the delta of a zero coupon bond maturing in 5 years.

Using base 100 pricing,the price of bonds that mature in years 1,2,3,and 4 is 93.46,92.22,91 98 and 90.23,respectively.Given this data,what is the 2-year forward price for a 2-year bond?

Assume a = 0.10,b = 0.15,r = 0.04 and σ = 0.35.Using the CIR model,calculate the price of a zero coupon bond maturing in 6 years.

Under what conditions does delta-gamma-theta approximate the exact bond price change?

Describe the effectiveness of duration as a tool in hedging bonds.

Bonds maturing in 1,2,and 3 years have prices of 0.9600,0.9153 and 0.8620,respectively.A 0.9300 strike call on a 1-year bond matures in 1 year with σ = 0.20.What is the price of an 8.0% interest rate caplet that expires in 1 year?

What is the transaction that results within an interest rate cap to make the holder's rate "capped"?

What are the various models in bond pricing and behavior? Ask students to describe the various models along with an explanation of each model's strengths and weaknesses.

Zero-coupon bonds maturing in 1,2,and 3 years have prices of 0.9020,0.8320,and 0.7620,respectively.What is the implied forward rate from year 2 to year 3?

Using base 100 pricing,the price of bonds that mature in years 1,2,and 3 is 101.92,100.87,and 99.34,respectively.Given this data,what is the 2-year forward price for a 1-year bond?

If next year's bond prices for 3-year zero coupon bonds may be either 0.8923 or 0.8644,what is the yield volatility?

Bonds maturing in 1,2,and 3 years have prices of 0.9323,0.8762,and 0.8002,respectively.A 0.8900 call on a 1-year bond matures in 1 year with σ = 0.25.What is the price of a 10.0% interest rate caplet that expires in 1 year?

Bonds maturing in 1,2,and 3 years have prices of 0.9345,0.8766,and 0.8212,respectively.What is the price of a call option that expires in two years and gives you the right to pay 0.8600 to buy the 1-year bond? Assume σ = 0.15.

Zero-coupon bonds maturing in 1,2,and 3 years have prices of 0.9345,0.8766,and 0.8212,respectively.What is the forward price for a 1-year bond purchased in year 2?

How does the node configuration in interest rates and bonds differ from stocks?

Assume a = 0.25,b = 0.13,r = 0.06,and σ = 0.25.Using the CIR model,calculate the gamma of a zero coupon bond maturing in 3 years.