Consider again the Hull White model Using tT E T t r T ,obtain the volatility of the SDE of the discount bond D(t,T) e T t t,s ds ...

Heres the derivation of the volatility of the discount bond ...

Consider again the Hull-White model. Using tT = E T t [r T ],obtain the volatility of

Question:

Consider again the Hull-White model. Using ƒtT = E^T_t [r_T],obtain the volatility of the SDE of the discount bond D(t,T) = e–∫^T_tƒt,s^ds .

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Market Practice In Financial Modelling

ISBN: 9789814366540

1st Edition

Authors: Tan Chia Chiang

See More Books

Question Posted: Dec 23, 2023 05:35 AM

See More Questions

Notwithstanding the discussion in Section 12.1.4, since we forecast based on Libor, the martingale equation only holds for risky discounting at the credit-worthiness of Libor counterparts. As such,...
Consider the SDE for the spot rate rt (a) Show that 9Suppose we brought in another equation containing B(t, U): (b) What do these two equations imply for the conditional mean and variance of spot...
To implement a real-time operating system with FreeRTOS kernel for a insulin pump controller. Considering the predictability, reliability, security, efficiency, explain why the performance of this...
Write a program that takes an integer command-line argument n and creates an n-by-n boolean array a[][] such that a[i][j] is true if i and j are relatively prime (have no common factors), and false...
Two popular methods of financial statement analysis are horizontal analysis and vertical analysis. Explain the difference between these two methods. Discuss.
A functional language could use some data structure other than the list. For example, it could use strings of single-character symbols. What primitives would such a language have in place of the CAR,...
What is variance? When is it called favourable and when is it called unfavourable?
For the year ended December 31, 2011, Fidelity Engineering reported pretax accounting income of $977,000. Selected information for 2011 from Fidelity's records follows: Interest income on municipal...
Marion contributed $6,000 to her retirement plan, the maximum contribution that was allowed for the year. The contribution was not deductible, but the earnings will be tax free when Marion withdraws...
Consider the construction of a trinomial tree for the general short rate model of form dy t = ((t) yt)dt + dW t, r t = g (yt). The approach typically involves constructing the tree for dx t = KX t...
Consider a two-factor short rate model described by dx t = where t,T is the HJM instantaneous forward rate. -Kr(t) xidt + oz(t)dWF, dyt -Ky(t)yidt + oy(t)dW!', rt = y(t) + x + yt and dWdW? = p(t)dt....
Journalize the following merchandise transactions: A. Sold merchandise on account, $92,500 with terms 1/10, n/30. The cost of the goods sold was $55,500. B. Received payment less the discount. C....
Cauchy's sequence theorem
QUESTION: 1 Discuss Local Government and Administration of Tanzania
Discuss how Central Governments Exercise Control over Local Governments by Citing Examples
Find derivative of sin x,cos a,tan x,secx,csca, cot a
Find anti derivative of cos x,sin x,sec r,sec r tan r,csc xcotx,csc r
Suppose you owe $1,100 on your credit card. The annual percentage rate (APR) is 18%, compounded monthly. The credit card company says your minimum monthly payment is $19.80. a. If you make only this...
Nate prepares slides for his microscope. In 1 day he prepared 12 different slides. Which equation best represents y, the total number of slides Nate prepares in x days if he continues at this rate? A...
What reaction will take place if H 2 O is added to a mixture of NaNH 2 /NH 3 ?
Identify the configuration of the chirality centers shown below: a. b. c. d. -NH2 CH- H - - CH
Identify what reagents you would use to achieve each transformation: a. Conversion of 2-methyl-2-butene into a secondary alkyl halide b. Conversion of 2-methyl-2-butene into a tertiary alkyl halide...
If you purchase a $1000 par value bond for $1065 that has a 6 3/8% coupon rate and 15 years until maturity, what will be your annual return? 5.5% 5.9% 5.7% 6.1%
Famas Llamas has a weighted average cost of capital of 8.8 percent. The companys cost of equity is 12 percent, and its pretax cost of debt is 6.8 percent. The tax rate is 22 percent. What is the...
The common stock of a company paid 1.32 in dividens last year. Dividens are expected to gros at an 8 percent annual rate for an indefinite number of years. A) If the company's current market price is...

Consider again the Hull-White model. Using tT = E T t [r T ],obtain the volatility of

Question:

Step by Step Answer:

Heres the derivation of the volatility of the discount bond ...View the full answer

Market Practice In Financial Modelling

Students also viewed these Business questions