You are given the following interest rate tree. Use it when required in the
exercises.
-What is the beneﬁt of using an interest rate model when compared to empirical estimates?

Question

You are given the following interest rate tree. Use it when required in the
exercises. 
-What is the beneﬁt of using an interest rate model when compared to empirical estimates?

Quizplus · Accepted Answer

The Answer is Interest rate models such as Ho-Lee and Black-Derman-Toy eliminate the posibilities for negative interest probabilities that may occur in simple empirical estimates.

You Are Given the Following Interest Rate Tree