Short-Rate Binomial Term-Structure Pricer (BDT-style)

This repo calibrates a recombining binomial short-rate tree to a zero-coupon discount curve and prices ZCBs via backward induction.

What it shows

• Risk-neutral pricing on a short-rate lattice
• Sequential calibration to match market discount factors
• Clean implementation + tests

Model

Short rate:

• r[t,j] = a[t] * exp((2j - t) * sigma * sqrt(dt))

Calibration chooses a[t] so that model ZCB prices match market discounts.

Quickstart

pip install -r requirements.txt
python -m pytest -q
python examples/run_demo.py

Next extensions (ideas)

• European call on a ZCB
• Caplet/Floorlet pricing
• Forward vs Futures difference under stochastic rates
• Swaps / swaptions on the tree