Consider the HullWhite model where the short rate is defined by Suppose we define a new variable

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Consider the Hull–White model where the short rate is defined by 

dr(t) = [(t) - ar(t)] dt + o dz(t).

Suppose we define a new variable x(t) where 

dx (t) = -ax(t) dt + o dZ(t), and let (t) = r(t) = x(t). Show that (t) and (t) are related by - '(t) + ay(t)

Also, show that the bond price B(t,T ) can be expressed as (Kijima and Nagayama, 1994)

B(0, T) B(0, t) 0 + 43 {1-[2-e-a(T-1)]+ (2 - e- - (2 eat)}. In B(t, T) In  + - - - [e-a (T-1) e-(Tt)  1][r(t)

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