Question #46
Reading: Reading 27 Valuation and Analysis of Bonds With Embedded Options
PDF File: Reading 27 Valuation and Analysis of Bonds With Embedded Options.pdf
Page: 12
Status: Unattempted
Question
Which of the following most accurately explains how the effective convexity is computed using the binomial model. In order to compute the effective convexity the:
Answer Choices:
A. binomial tree has to be shifted upward and downward by the same amount for all nodes
B. yield curve has to be shifted upward and downward in a parallel manner and the binomial tree recalculated each time
C. volatility has to be shifted upward and downward and the binomial tree recalculated each time
No explanation available for this question.