Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments July 1999 erstellt
Beschreibung:
In this article we implement the well known Ho-Lee Model of the term structure of interest rates and describe the algorithm behind this model. After a brief discussion of interest rates and bonds we construct a binomial tree and show how to replicate any fixed income type security. This allows us to value any interest rate contingent claim by means of the replicating portfolio. We also discuss the problem of negative interest rates arising in this model and show how to calibrate the model to an observed set of bond prices