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Downlaod File
Downlaod File

... Indirect finance is where borrowers borrow funds from the financial market through indirect means, such as through a financial intermediary. Direct finance where there is a direct connection to the financial markets as indicated by the borrower issuing securities directly on the market. ...
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Lattice model (finance)



For other meanings, see lattice model (disambiguation)In finance, a lattice model [1] is a technique applied to the valuation of derivatives, where, because of path dependence in the payoff, 1) a discretized model is required and 2) Monte Carlo methods fail to account for optimal decisions to terminate the derivative by early exercise. For equity options, a typical example would be pricing an American option, where a decision as to option exercise is required at ""all"" times (any time) before and including maturity. A continuous model, on the other hand, such as Black Scholes, would only allow for the valuation of European options, where exercise is on the option's maturity date. For interest rate derivatives lattices are additionally useful in that they address many of the issues encountered with continuous models, such as pull to par.
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