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GIC Coupon The model assumes that the GIC holder receives deterministic payments on specified payment days, and the embedded put option is exercised by the GIC holder when the redemption value exceeds the holding value. We assume a stochastic interest rate environment, with the short interest rate dynamics governed by a HW model of the form, We use the HW tree described above to evaluate the terms of eq. (3). It employs Brent's root finding method for solving eq. (3), which is guaranteed to converge if a root exists within the given interval. One can expect monotonic behavior of the left hand side of equation (3) as a function of the transfer coupon rate, which ensures the uniqueness of the eq. (3) root. This is supported by the graph in Figure 1 that shows the difference between the left and right sides of eq. (3) for the Premium GIC specified in Section 6 below.
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