Under the one-factor HJM framework, show that where E t Q denotes the expectation under the risk

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Under the one-factor HJM framework, show that

T T Eglr(T)] = F(t, T) + E'q[" (or(u, T) [" - E'o [f" (OF(u, T) [" OF(u, s) ds) du]. Q

where E^tQ denotes the expectation under the risk neutral measure Q conditional on information F_t. Explain why the forward rate F(t, T) is a biased estimator of r(T) under Q.

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Mathematical Models Of Financial Derivative

ISBN: 9783642447938

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Authors: Yue-Kuen Kwok

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Question Posted: Nov 30, 2023 07:31 AM

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Under the one-factor HJM framework, show that where E t Q denotes the expectation under the risk

Question:

T T Eglr(T)] = F(t, T) + E'q[√" (or(u, T) [" - E'o [f" (OF(u, T) [" OF(u, s) ds) du]. Q

Step by Step Answer:

In the onefactor HeathJarrowMorton HJM model the dynamics of the short rate rt are given by the stoc...View the full answer

Mathematical Models Of Financial Derivative

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