This Excel spreadsheet calculates the price of a Bond option with a binomial tree.
Bond options give the purchaser the right (but not the obligation) to buy or sell a bond at or before a specific date.
If you purchase a bond call, you generally expect interest rates to decrease (with a subsequent increase the price of a bond).
However, if you purchase a bond put, you generally expect interest rates to climb, and bond prices to fall.
The spreadsheet uses the binomial tree model suggested by Rendleman & Bartter (1980). The one-factor model assumes that the short-rate is guided by geometric brownian motion.
Other spreadsheets use the Black 76 and the Shaefer & Schwartz models to price bond options.
Download Excel Spreadsheet to Price Bond Option with Binomial Tree
Hello!
The “Download Excel Spreadsheet to Price Bond Option with Binomial Tree” doesn’t contain a spreadsheet. Could you have a look at that? And tell me when the spreadsheet is available.
Cheers,
Fixed!