Been having very hard time understanding this topic. I'm using both TIA and ASM manual and I'm having problem understanding it overall. Any good way to understand this topic?
I'm having hard time understanding the time format of the problems, and how the models are laid out.
"determine the lognormal yield volatility of zero-coupon bonds with 2 years to expiry at time 1" I know that if the price is 100 at time 0, you are looking for a price to pay in 1 year that matures in year 3 (1st period on model). But then I don't understand how to read it on a 2 period model.
or
you have 2 period table, each intervals 6 months, question reads "determine lognormal yield volatility for 1-year bonds issued at the end of 6 months" can someone tell me what exact time period i'm supposed to look at? I know how to ultimately calculate the volatility, but I don't understand which time period to look at whenever these questions are laid out.
any help will be appreciated. thanks.
I'm having hard time understanding the time format of the problems, and how the models are laid out.
"determine the lognormal yield volatility of zero-coupon bonds with 2 years to expiry at time 1" I know that if the price is 100 at time 0, you are looking for a price to pay in 1 year that matures in year 3 (1st period on model). But then I don't understand how to read it on a 2 period model.
or
you have 2 period table, each intervals 6 months, question reads "determine lognormal yield volatility for 1-year bonds issued at the end of 6 months" can someone tell me what exact time period i'm supposed to look at? I know how to ultimately calculate the volatility, but I don't understand which time period to look at whenever these questions are laid out.
any help will be appreciated. thanks.
Black-Derman-Toy model
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