Suppose that the tenor structure T? 1 , T 0 , . . . , T N

Question:

Suppose that the tenor structure T?1, T0, . . . , TN is equispaced, with ?t = Tn ? Tn?1 and T?1 = 0. For 0 ? t ? TN, the discretely rebalanced bank account Bd(t) has present value.

image

with

image

where ?(x) is again the Heaviside-?-function. Use Theorem 17.2 on page 390 to prove that Xt has the dynamics

image

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question
Question Posted: