https://gdpark.blog/tags/backward-induction/Recent content in Backward-Induction on gdpark.blogHugoenSun, 29 Dec 2024 00:00:00 +0000https://gdpark.blog/posts/cfa-l2-11-binomial-trees-part-2/Mon, 16 Dec 2024 00:00:00 +0000https://gdpark.blog/posts/cfa-l2-11-binomial-trees-part-2/This time we build the interest rate tree from scratch — calibration, e^{2σ} forward-rate spacing, and all — then value it via backward induction or pathwise.https://gdpark.blog/posts/cfa-l2-11-valuing-option-free-bonds-with-the-binomial-model/Sat, 14 Dec 2024 00:00:00 +0000https://gdpark.blog/posts/cfa-l2-11-valuing-option-free-bonds-with-the-binomial-model/A quick walkthrough of valuing option-free bonds using backward induction on a binomial tree, plus why pathwise valuation matters when cash flows are path-dependent.https://gdpark.blog/posts/cfa-l2-18-capped-and-floored-floaters/Sun, 29 Dec 2024 00:00:00 +0000https://gdpark.blog/posts/cfa-l2-18-capped-and-floored-floaters/Capped floaters put a ceiling on the coupon (great for the issuer), floored floaters set a minimum (great for you), and you value both by tweaking a binomial tree and working backward.