This question is most relevant to the evaluation of embedded options, such as the refinancing option granted to borrowers in the mortgage and bank loan markets, or the call option present in some ...
I am trying to work out how to value the following transactions. It should be straight forward, since it breaks down into a series of well known instruments, yet I am not sure how to evaluate it: ...
I'm using a binomial tree to price a bond that has an embedded call or put option. On every node that has a coupon payment, do you include the coupon payment then max/min out the value, or do you ...