How do we computer the bond value at each node

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How do we computer the bond's value at each node? How is the interest rate tree rendered arbitrage-free?
Explain how the value of an embedded call option is determined.
What does the volatility parameter in an interest rate model represent?
Explain why the greater the assumed volatility, the lower the value of a callable bond?
How are the Z-spread, option-adjusted spread, and option cost related?

Reference no: EM133058523

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