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Another Look at the Ho-Lee Bond Option Pricing Model. (arXiv:1712.06664v1 [q-fin.MF])

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In this paper, we extend the classical Ho-Lee binomial term structure model to the case of time-dependent parameters and, as a result, resolve a drawback associated with the model. This is achieved with the introduction of a more flexible no-arbitrage condition in contrast to the one assumed in the Ho-Lee model.


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