He, Y.; Hu, Y.; Rachev, S. The Implied Views of Bond Traders on the Spot Equity Market. Frontiers in Applied Mathematics and Statistics 2023, 9, doi:10.3389/fams.2023.1324079.
He, Y.; Hu, Y.; Rachev, S. The Implied Views of Bond Traders on the Spot Equity Market. Frontiers in Applied Mathematics and Statistics 2023, 9, doi:10.3389/fams.2023.1324079.
He, Y.; Hu, Y.; Rachev, S. The Implied Views of Bond Traders on the Spot Equity Market. Frontiers in Applied Mathematics and Statistics 2023, 9, doi:10.3389/fams.2023.1324079.
He, Y.; Hu, Y.; Rachev, S. The Implied Views of Bond Traders on the Spot Equity Market. Frontiers in Applied Mathematics and Statistics 2023, 9, doi:10.3389/fams.2023.1324079.
Abstract
By using the Black-Derman-Toy (BDT) model, we predict the future trend of the riskless rate, and then we build an equation that relates the market price of zero-coupon bonds and the theoretical price of zero-coupon bonds calculated using a binomial option pricing model. Based on this, we can find the implied daily return μ, implied natural upturn probability p, and implied daily volatility σ with respect to different time-to-maturity values of zero-coupon bonds. With these results, we can give some suggestions to bond traders.
Copyright:
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