The Zero Black-Derman-Toy (ZBDT) model extends the BDT tree with a sticky near-zero interest rate state, producing nonzero prices for deep in-the-money bond options that the standard BDT tree prices at zero.
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Zero Black-Derman-Toy interest rate model
The Zero Black-Derman-Toy (ZBDT) model extends the BDT tree with a sticky near-zero interest rate state, producing nonzero prices for deep in-the-money bond options that the standard BDT tree prices at zero.