Exercise 26.5.3 Consider the forward rate dynamics in Eq. (26.13) and define r (t, ) f

Exercise 26.5.3 Consider the forward rate dynamics in Eq. (26.13) and define r (t, τ) ≡ f (t, t +τ ). Verify that dr(r, τ) =



∂r (t, τ)

∂τ

+μ(t, t +τ )



dt +σ(t, t +τ )dWt .

Note that τ denotes the time to maturity.