Exercise 26.2.10 Prove that ln 1+t1 1+t 1 2 ln 2t ( t)2 if

Exercise 26.2.10 Prove that

−ln



1+δt−1 1+δt



− 1 2

ln δ→σ2t (t)2 if we substitute t/t for t and apply Eq. (26.4). The t, t, and σ above are annualized.

(Short rate process (26.6) thus converges to dr = {[ ∂ f (0, t)/∂t ]+σ2t } dt +

σ dW.)