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Use the Fact That the Pseudo-Probability of Default at Time

Question 6

Multiple Choice

Use the fact that the pseudo-probability of default at time zero is (1/ 2) to answer the questions that follow. -Consider a caplet with maturity time 1 and strike price 0.035.What is the time 0 value of the caplet? A) 0.0025 B) 0.0000 C) 0.0042 D) 0.0050 E) 0.0021 Use the fact that the pseudo-probability of default at time zero is (1/ 2) to answer the questions that follow.
-Consider a caplet with maturity time 1 and strike price 0.035.What is the time 0 value of the caplet?


A) 0.0025
B) 0.0000
C) 0.0042
D) 0.0050
E) 0.0021

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