For simplicity, assume the Ho-Lee dynamics dr t = (t)dt+dW t . The forward rate is given

For simplicity, assume the Ho-Lee dynamics dr_t = θ(t)dt+σdW_t. The forward rate is given via ƒ(t,T) = E^T_t [r_T]. (All this will become clear when we discuss short rate models in Chapter 8.) Suppose the payment is not at T but at a much later time S (e.g. S = T + 10y). Derive a formula for the payment delay adjustment. Hence, see how little the impact of payment delay is when the underlying rate sets quickly (i.e. T is small).