Keywords - Function groups - @ A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Library: finance
See also: ITTcrr ITTad ITT

Quantlet: ITTnewnodes
Description: auxiliary quantlet for ITT. It computes the new level for an implied trinomial tree, so that the forward condition is not violated.

Usage: {newnodes,overwritten}=ITTnewnodes(old,r,sigma,deltat,div)
Input:
old vector; last level of the trinomial tree
r scalar; CONTINUOUS interest rate from interval (0,1)
sigma scalar; constant volatility from interval (0,1)
deltat scalar; the time step between the last and the new level
div scalar; the CONTINUOUS dividend rate from interval (0,1)
Output:
newnodes vector; new level of the ITT; the forward price lies always between the relevant tree nodes
overwritten vector; overwritten nodes (because of the arbitrage) in the new level of the ITT




Author: K. Komorad, W. Haerdle, 20020131 license MD*Tech
(C) MD*TECH Method and Data Technologies, 05.02.2006