Bond valuation under risk, flexibility and interaction on a game theory basis

Valuation and decision making is realised under different conditions. The basic characteristics are following risk, flexibility and interaction. Bond price depends on valuation conditions. The objective of the paper is to derive, describe the models of bond prices under risk, flexibility and interaction. Interaction is deal with game theory. There are derived and described bond prices. There are bond prices calculated and compared under binomial model based on the Ho-Lee arbitrage model for forward rates. Conclusions and findings are that valuation conditions substantially influence bond prices and therefore have to be included in valuation process.