Suppose that x is the yield to maturity with continuous compounding on a zero-coupon bond that pays

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Suppose that x is the yield to maturity with continuous compounding on a zero-coupon bond that pays off $1 at time T. Assume that x follows the process dx = a(x0 — x)dt + sx dz where

a, XQ, and s are positive constants and dz is a Wiener process. What is the process followed by the bond price?

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Options Futures And Other Derivatives

ISBN: 9780130090560

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Authors: John C. Hull

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Question Posted: Oct 18, 2024 07:02 AM

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Suppose that x is the yield to maturity with continuous compounding on a zero-coupon bond that pays

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