Exercise 5 1 Suppose that r is an Ornstein Uhlenbeck with parameters a, b, under the equivalent martingale measure (a) Find (b) For any x R and u R, find The last expectation can be useful for approximating the value of a Bermudan call or put option on a zero coupon bond E eui(T) (a)da (t) r , UER ...

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Exercise 5.1 Suppose that r is an Ornstein-Uhlenbeck with parameters a, b, under the equivalent martingale

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Exercise 5.1 Suppose that ˜r is an Ornstein-Uhlenbeck with parameters

a, b, σ under the equivalent martingale measure.

(a) Find

image text in transcribed

(b) For any x ∈ R and u ∈ R, find

The last expectation can be useful for approximating the value of a Bermudan call or put option on a zero-coupon bond.

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Statistical Methods For Financial Engineering

ISBN: 9781032477497

1st Edition

Authors: Bruno Remillard

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Question Posted: Oct 26, 2024 06:01 AM

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Exercise 5.1 Suppose that r is an Ornstein-Uhlenbeck with parameters a, b, under the equivalent martingale

Question:

E {eui(T) (a)da | (t) = r}, UER. (5.25)

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Statistical Methods For Financial Engineering

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