Financial Exam Help 123

The place to get help for the CFA® exams

  • Welcome!
  • Bill Campbell III, CFA
  • Services
  • Registration
  • Log In
  • CFA Level I
  • CFA Level II
  • CFA Level III
  • Sample Articles
  • Sample Exam
  • FAQs
  • Submit a Testimonial
  • Contact Us
  • Store
  • Downloads
  • Errata

Binomial Trees (for Fixed Income)

Posted by Bill Campbell III, CFA on February 28, 2016
Posted in: Free.

Binomial trees are used in a variety of contexts in finance:

  • Calculating probabilities for Bayes’ Formula type problems
  • Calculating the value of options on stocks, commodities, and so on
  • Calculating the option-adjusted spread (OAS) for bonds
  • Calculating the value of bonds with embedded options
  • Calculating the value of floating-rate bonds
  • Calculating the value of interest rate caps and floors

In this series of articles, we’ll be concerned with the application of binomial trees to the valuation of bonds.  For the other applications, click on the links above.  We’ll cover:

  • How a binomial interest rate tree is created (Although you’ll never have to do this on the exam, it’s interesting in its own right, and it forestalls the otherwise inevitable question, “Where did they get the numbers in the tree?”)
  • How a binomial interest rate tree is used to calculate OAS
  • How a binomial interest rate tree is used to value bonds with embedded options
  • How a binomial interest rate tree is used to value floating-rate bonds

That’s more than enough.

Posts navigation

← Creating a Binomial Interest Rate Tree
Option-Adjusted Spread (OAS) →
  • Search

  • What people have to say about Financial Exam Help 123

    Game-changer

    A few months ago, a colleague recommended that I try Bill Campbell’s classes for the essay part of the exam. His feedback on the mock-exams and tips were instrumental in helping me pass the exam at last. Bill is extremely knowledgeable, wise & patient and a pleasure to work with. His materials were great, particularly the mocks that were rather challenging, but arm you for the worst and make the actual exam a breeze. I hope that you will have the pleasure and privilege of working with him as well.

    Aleksandar Zavišić, CFA

    Aleksandar Zavišić
    Ilirika Investments

    Read More Testimonials »

  • Recent Posts

    • Yield Curve Strategies – Dynamic Yield Curve
    • Yield Curve Strategies – Static Yield Curve
    • Dividend Discount Models
    • Equity Valuation Models
    • Short Butterfly Spread
    • Short Strangle
    • Inverse (Short) Straddle
    • Yield Curve Strategies – General
    • Tax Bases
    • Accounting Taxes vs. Tax Return Taxes
  • Archives

  • April 2023
    S M T W T F S
     1
    2345678
    9101112131415
    16171819202122
    23242526272829
    30  
    « Mar    
  • Meta

    • Register
    • Log in
    • Entries feed
    • Comments feed
    • WordPress.org
Proudly powered by WordPress Theme: Parament by Automattic.

Copyright © 2013 - 2022 Bill Campbell III, CFA · (714) 694-0174  · Email: bill@financialexamhelp123.com

CFA Institute does not endorse, promote or warrant the accuracy or quality of Financial Exam Help 123. CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.