Solution-Determining the option valuation model

Determining the option valuation model

Reference no: EM132509658

If the yield volatility for a five-year put option on a bond maturing in 10 years is specified as 24 %. Based on today's interest rates, the modified duration of the bond at the maturity of the option will be 5.2 years, and the forward yield on the bond is 8%. What is the volatility that should be used in the option valuation model for this put?

Reference no: EM132509658

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Determining the option valuation model

Reference no: EM132509658

Reference no: EM132509658

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