Consider the model for lognormal interest rates Assume that b02 = 08679 b03 = 08006 and buu23= 08942 bud2 3 = 09243 and bdd23 = 09463 Assume also that p = risk-neutral probability of an uptick = 05 Th

To calculate the futures price, we can use the formula:

Hh(2,3) = (1 + b(0,3)) / (1 + b(0,2)) * (p * buu23 + (1-p) * bdd/2,3)

Plugging in the given values:

Hh(2,3) = (1 + 0.8006) / (1 + 0.8679) * (0.5 * 0.8942 + (1-0.5) * 0.9463)

Hh(2,3) = 0.9239 * (0.5 * 0.8942 + 0.5 * 0.9463)

Hh(2,3) = 0.9239 * (0.4471 + 0.4732)

Hh(2,3) = 0.9239 * 0.9203

Hh(2,3) = 0.8511

Therefore, the futures price, Hh(2,3), is approximately 0.8511.