 31.31.1: What is the difference between an equilibrium model and a noarbitr...
 31.31.2: Suppose that the short rate is currently 4% and its standard deviat...
 31.31.3: If a stock price were mean reverting or followed a pathdependent p...
 31.31.4: Explain the difference between a onefactor and a twofactor intere...
 31.31.5: Can the approach described in Section 31.4 for decomposing an optio...
 31.31.6: Suppose that a 0:1 and b 0:1 in both the Vasicek and the Cox, Inger...
 31.31.7: Suppose that a 0:1, b 0:08, and 0:015 in Vasiceks model, with the i...
 31.31.8: Repeat 31.7 valuing a European put option with a strike of $87. Wha...
 31.31.9: Suppose that a 0:05, b 0:08, and 0:015 in Vasiceks model with the i...
 31.31.10: Use the answer to 31.9 and putcall parity arguments to calculate th...
 31.31.11: In the HullWhite model, a 0:08 and 0:01. Calculate the price of a 1...
 31.31.12: Suppose that a 0:05 and 0:015 in the HullWhite model with the initi...
 31.31.13: Observations spaced at intervals t are taken on the short rate. The...
 31.31.14: Suppose a 0:05, 0:015, and the term structure is flat at 10%. Const...
 31.31.15: Calculate the price of a 2year zerocoupon bond from the tree in F...
 31.31.16: Calculate the price of a 2year zerocoupon bond from the tree in F...
 31.31.17: Calculate the price of an 18month zerocoupon bond from the tree i...
 31.31.18: What does the calibration of a onefactor term structure model invo...
 31.31.19: Use the DerivaGem software to value 1 4, 2 3, 3 2, and 4 1 European...
 31.31.20: Prove equations (31.25), (31.26), and (31.27).
 31.31.21: (a) What is the second partial derivative of Pt; T with respect to ...
 31.31.22: Suppose that short rate r is 4% and its realworld process is dr 0:...
 31.31.23: Construct a trinomial tree for the HoLee model where 0:02. Suppose ...
 31.31.24: A trader wishes to compute the price of a 1year American call opti...
 31.31.25: Use the DerivaGem software to value 1 4, 2 3, 3 2, and 4 1 European...
 31.31.26: Verify that the DerivaGem software gives Figure 31.11 for the examp...
 31.31.27: Modify Sample Application G in the DerivaGem Application Builder so...
 31.31.28: Suppose that the (CIR) process for shortrate movement in the (trad...
Solutions for Chapter 31: Interest Rate Derivatives: Models of the Short Rate
Full solutions for Options, Futures, and Other Derivatives  9th Edition
ISBN: 9780133456318
Solutions for Chapter 31: Interest Rate Derivatives: Models of the Short Rate
Get Full SolutionsSince 28 problems in chapter 31: Interest Rate Derivatives: Models of the Short Rate have been answered, more than 15286 students have viewed full stepbystep solutions from this chapter. Chapter 31: Interest Rate Derivatives: Models of the Short Rate includes 28 full stepbystep solutions. Options, Futures, and Other Derivatives was written by and is associated to the ISBN: 9780133456318. This textbook survival guide was created for the textbook: Options, Futures, and Other Derivatives, edition: 9. This expansive textbook survival guide covers the following chapters and their solutions.

accounting profit
total revenue minus total explicit cost

agent
a person who is performing an act for another person, called the principal

business cycle
fluctuations in economic activity, such as employment and production

common resources
goods that are rival in consumption but not excludable

consumer surplus
the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it

diversification
the reduction of risk achieved by replacing a single risk with a large number of smaller, unrelated risks

efficiency
the property of society getting the most it can from its scarce resources

equality
the property of distributing economic prosperity uniformly among the members of society

equilibrium
a situation in which the market price has reached the level at which quantity supplied equals quantity demanded

financial system
the group of institutions in the economy that help to match one person’s saving with another person’s investment

marginal cost
the increase in total cost that arises from an extra unit of production

menu costs
the costs of changing prices

perfect substitutes
two goods with straightline indifference curves

price elasticity of supply
a measure of how much the quantity supplied of a good responds to a change in the price of that good, computed as the percentage change in quantity supplied divided by the percentage change in price

profit
total revenue minus total cost

real exchange rate
the rate at which a person can trade the goods and services of one country for the goods and services of another

regressive tax
a tax for which highincome taxpayers pay a smaller fraction of their income than do lowincome taxpayers

social insurance
government policy aimed at protecting people against the risk of adverse events

welfare
government programs that supplement the incomes of the needy welfare economics the study of how the allocation of resources affects economic wellbeing

world price
the price of a good that prevails in the world market for that good