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STOCHASTIC CALCULUS FOR INSURANCE AND FINANCE Suppose that the following short rate model dr = 0.1(0.08 r)dt + 0.0150W has initial value of the short

**STOCHASTIC CALCULUS FOR INSURANCE AND FINANCE**

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Suppose that the following short rate model dr = 0.1(0.08 r)dt + 0.0150W has initial value of the short rate of 5%. A zero coupon bond with a principal of $100 will mature in three years and the strike price is $87. Calculate the price of a one-year European put option on this zero coupon bond

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