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In this paper we continue the research of our recent interest rate tree modelcalled Zero Black-Derman-Toy (ZBDT) model, which includes the possibility of ajump at each step to a practically zero interest rate. This approach allows tobetter match to risk of financial slowdown caused by catastrophic events. Wepresent how to valuate a wide range of financial derivatives for such a model.The classical Black-Derman-Toy (BDT) model and novel ZBDT model are describedand analogies in their calibration methodology are established. Finally twocases of applications of the novel ZBDT model are introduced. The first of themis the hypothetical case of an S-shape term structure and decreasing volatilityof yields. The second case is an application of the ZBDT model in the structureof United States sovereign bonds in the current $2020$ economic slowdown causedby the Coronavirus pandemic. The objective of this study is to understand thedifferences presented by the valuation in both models for differentderivatives.

Performance analysis of Zero Black-Derman-Toy interest rate model in catastrophic events: COVID-19 case study