Examlex
Assume that after you estimate the risk neutral model for the continously compounded rate you arrive at the tree presented at the beginning of this chapter. There is equal probability of moving up or down on the tree. Price a 2-year swap with N = 100 and c =3%.
Increases
This term refers to a situation where a quantity or quality of something goes up or becomes more.
Constant-Cost Industry
An industry where the costs of production do not change as the overall level of production increases or decreases.
Long-Run Supply
The total amount of a good or service that is available in the market over a long term, taking into account adjustments in production and entry or exit of firms.
Decreasing-Cost Industry
An industry where increased production leads to lower costs per unit, typically due to economies of scale or technological improvements.
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