Exercise 16.7 As in Longstaff and Schwartz (1995b), suppose that the defaultfree spot rates r(t) follow the
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Exercise 16.7 As in Longstaff and Schwartz (1995b), suppose that the defaultfree spot rates r(t) follow the Vasicek model
and that the asset value A(t) follows the GBM
where dzrdzA = ρdt and where the other parameters are constants. In the framework of the Merton model, obtain the debt value vc(0, T).
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Related Book For 
Stochastic Processes With Applications To Finance
ISBN: 9781439884829
2nd Edition
Authors: Masaaki Kijima
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