Suppose that the (CIR) process for short-rate movement in the risk-neutral world is dra(b-r)dt+ard: and the market

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Suppose that the (CIR) process for short-rate movement in the risk-neutral world is dra(b-r)dt+ard: and the market price of interest rate risk is A.

(a) What is the real world process for r?

(b) What is the expected return and volatility for a 10-year bond in the risk-neutral world?

(c) What is the expected return and volatility from a 10-year bond in the real world?P-987

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Options Futures And Other Derivatives

ISBN: 9780273759072

8th Global Edition

Authors: John Hull

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Question Posted: Oct 22, 2024 06:03 AM

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Suppose that the (CIR) process for short-rate movement in the risk-neutral world is dra(b-r)dt+ard: and the market

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Options Futures And Other Derivatives

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