Exercise (Adapted from Bjrk () ) Define the process y (yt) by yt z t , where z (zt) is a standard Brownian motion Find the dynamics of y Show that yt t z s ds t z s dzs Show that E yt E z t t , where E denotes the expectation given the information at time ...

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Exercise . (Adapted from Bjrk ().) Define the process y = (yt) by yt = z t

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Exercise . (Adapted from Björk ().) Define the process y = (yt) by yt =

z

t , where z = (zt) is a standard Brownian motion. Find the dynamics of y. Show that yt = 



z

s ds + 



z

s dzs.

Show that E[yt] ≡ E[z

t ] = t

, where E[ ] denotes the expectation given the information at time .

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Fixed Income Modelling

ISBN: 978-0198716440

1st Edition

Authors: Claus Munk

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Question Posted: Oct 29, 2024 09:01 AM

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Exercise . (Adapted from Bjrk ().) Define the process y = (yt) by yt = z t

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Fixed Income Modelling

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