Instructional Video: Tuckman, Chapter 7: The Science of Term Structure Models

Tuckman,  The Science of Term Structure Models, is a one-hour instructional video analyzing the following concepts: 

* Calculate the expected discounted value of a zero-coupon security using a binomial tree.
* Construct and apply an arbitrage argument to price a call option on a zero-coupon security using replicating portfolios.
* Define risk-neutral pricing and explain how it is used in option pricing.
* Distinguish between true and risk-neutral probabilities, and apply this difference to interest rate drift.
* Explain how the principles of arbitrage pricing of derivatives on fixed income securities can be extended over multiple periods.
* Define option-adjusted spread (OAS) and apply it to security pricing.
* Describe the rationale behind the use of recombining trees in option pricing.
* Calculate the value of a constant maturity Treasure swap, given an interest rate tree and the risk-neutral probabilities.
* Evaluate the advantages and disadvantages of reducing the size of the time steps on the pricing of derivatives on fixed income securities.
* Evaluate the appropriateness of the Black-Scholes-Merton model when valuing derivatives on fixed income securities.
* Describe the impact of embedded options on the value of fixed-income securities.

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