Hi guys,could you give me, please, some insights on Bermudan Bond Option Valuation.If I have a callable bond that is callable at a discrete number of dates (let's say 6 - e.g. we have a callable bond schedule)how should I account for the option value at the different call dates no matterwhether it is European or American exercise style and subsequently receive the option price at the present moment.Thank you in advance.

If it's European or American exercise, then it's not Bermudan.It's easy to value the bond at the last coupon date before maturity. The issuer has a choice of paying Par plus Call Premium today or Par plus Coupon at maturity. Let r be the discount rate of the issuer from the last coupon date before maturity to maturity. If r < (Coupon - CP)/(Par + CP) then the issuer will call, otherwise the issuer will not call.To solve for price two coupons before maturity, you need a model of interest rate dynamics. The simplest one is binomial, although that will not be accurate enough for real pricing. For each interest rate you can represent the value of the bond two coupon dates before maturity as a combination of an identical bond that is not immediately callable and a risk-free, one coupon period investment. That gives you price as a function of 1 and 2 coupon period discountt rates.You can repeat the process for the prior coupon date, and work your way back to the present. Once you know the value of the bond, the value of the call option is just the value of a noncallable bond minus the value of the callable bond.