Is the value of a bond in a node except for time0 is 0.5 * [(Vu + C)/(1+r) + (Vd + C)/(1+r)], for time0 is 0.5 * [(Vu)/(1+r) + (Vd)/(1+r)]Half the time the curriculum says the Value is formula (except time0) plus the current coupon, other times the coupon is left out. Can someone explain the reasoning?

if it is a coupon paying bond then you MUST include it. Not all bonds pay coupons. In short, if theres a coupon then include it, if not then don't.

A CFA Level 2 Discussion About Binomial Tree

This topic has 1 reply, 2 voices, and was last updated Sep-189:07 pm by googs1484.

Viewing 0 reply threads