This thesis suggests a convenient tool for the practitioners to value range floaters ("USD Structured Interest Rate Linked Notes") with Black, Derman and Toy's model(1990). Especially, we use the forward induction technique developed by Jamshidian(1991) to construct the interest rate tree. In addition, we use the historical volatility with different time periods.
An analysis of a case shows that the price of range floaters is less sensitive to the volatility of interest rate because the effect of volatility to the price is offset by that of increasing the cash inflow from coupon rate raise.
