Exercise . (Comparison of prices in the models of Vasicek and CIR) Compare the prices according to Vasicek’s model (.) and the CIR-model (.) of the following securities:

(a) -year and -year zero-coupon bonds;

(b) -month European call options on a -year zero-coupon bond with exercise prices of ., ., and ., respectively;

(c) a -year % bullet bond with annual payments;

(d) -month European call options on a -year % bullet bond with annual payments for three different exercise prices chosen to represent an in-themoney option, a near-the-money option, and an out-of-the-money option.

In the comparisons use κ = ., θ = ., and λ =  for both models. The current short rate is r = ., and the current volatility on the short rate is . so that

β = . in Vasicek’s model and β

√. = . in the CIR model.