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Assume that the continuously-compounded spot yield curve is as follows: r(0,0.5) 1.2%, r(0,1)= 1.6%, r(0,1.5) = 2%, r(0,2)= 2.2%. = Fit the drift parameters
Assume that the continuously-compounded spot yield curve is as follows: r(0,0.5) 1.2%, r(0,1)= 1.6%, r(0,1.5) = 2%, r(0,2)= 2.2%. = Fit the drift parameters 0 (i = 0, 1, 2) in the previous Ho-Lee model so that the model matches the observed spot yield curve perfectly. What are the 0; values?
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To fit the HoLee model to the observed spot yield curve we need to solve for the three drift paramet...
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Fixed Income Securities Valuation Risk and Risk Management
Authors: Pietro Veronesi
1st edition
0470109106, 978-0470109106
