CFA Level 2 | Fixed Income: Generating the Binomial Interest Rate Tree

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CFA Level 2
Topic: Fixed Income
Reading: The Arbitrage-Free Valuation Framework

In this video, I show how the binomial interest rate tree for the purposes of bond valuation. The CFA syllabus does not discuss how it is done, only the condition of the calibration.

Take note that the generation of the binomial interest rate tree is not examinable in the exam and this video is only for educational purposes, for those who want to know how binomial interest rate trees are calibrated to the current term structure.

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