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Figure 6.1: An Example of a Zero-coupon Bond Price Curve

Figure 6.1: An Example of a Zero-coupon Bond Price Curve. 1.037958. é. ù. 967826. ê. ú. 984222. Figure 6.2: An Example of a Zero-coupon Bond Price Curve Evolution and a Trading Strategy (n 0 (t), n 4 (t), n 3 (t), n 2 (t)). ê. ú. 1. ë. û. 1.02. (0,0,0,0). é. ù. 947497. ê. ú.

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Figure 6.1: An Example of a Zero-coupon Bond Price Curve

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  1. Figure 6.1: An Example of a Zero-coupon Bond Price Curve

  2. 1.037958 é ù . 967826 ê ú . 984222 Figure 6.2: An Example of a Zero-coupon Bond Price Curve Evolution and a Trading Strategy (n0(t), n4(t), n3(t), n2(t)). ê ú 1 ë û 1.02 (0,0,0,0) é ù . 947497 ê ú . 965127 1.017606 ê ú . 982699 ê ú 1.037958 1 ë û (0,0,3.5,0) é ù . 960529 ê ú . 980015 ê ú 1 B(0) ë û 1 é ù é ù P ( 0 , 4 ) . 923845 (0,0,0,0) ê ú ê ú P ( 0 , 3 ) . 942322 r(0) = 1.02 = ê ú ê ú P ( 0 , 2 ) . 961169 ê ú ê ú P ( 0 , 1 ) . 980392 ê ú ê ú 1.042854 P ( 0 , 0 ) 1 ë û ë û é ù . 962414 ê ú . 981169 ê ú 1 1.02 ë û (0,0,0,0) é ù . 937148 ê ú . 957211 1.022406 ê ú . 978085 ê ú 1 ë û 1.042854 (0,0,0, -.5962084 ) é ù . 953877 ê ú . 976147 ê ú 1 ë û (0,0,0,0) time 0 1 2

  3. Figure 6.3: An Example of a Zero-coupon Bond Price Curve Evolution with an Arbitrage Opportunity 1 . 02 é ù . 965127 ê ú . 982695 ê ú 1 ë û B ( 0 ) 1 é ù é ù P ( 0 , 3 ) . 942322 = = r ( 0 ) 1 . 02 ê ú ê ú P ( 0 , 2 ) . 960000 ê ú ê ú P ( 0 , 1 ) . 980392 ê ú ê ú P ( 0 , 0 ) 1 ë û ë û 1 . 02 é ù . 957211 ê ú . 978085 ê ú 1 ë û time 0 1

  4. Figure 6.4: An Example of a Zero-coupon Bond Price Curve Evolution in a Complete Market 1 . 02 é ù . 982699 ê ú 1 ë û B ( 0 ) 1 é ù é ù P ( 0 , 2 ) . 961169 = = r ( 0 ) 1 . 02 ê ú ê ú P ( 0 , 1 ) . 980392 ê ú ê ú P ( 0 , 0 ) 1 ë û ë û 1 . 02 é ù . 978085 ê ú 1 ë û time 0 1

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