Exercise 16.10 In contrast to Exercise 16.9, suppose that the interest rates are constant, say r(t) = r, but the hazard-rate process {h(t)} follows the Cox–Ingersoll–Ross (CIR) model

Obtain the time-t price of the debt for each recovery formulation.

Transcribed Image Text:

dh = a(mh)dt+ohdz, 0