0. 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(xo - x) dt + sx dz where a, xp, and s are positive constants and dz is a Wiener process. What is the process followed by the bond price?
0. 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(xo - x) dt + sx dz where a, xp, and s are positive constants and dz is a Wiener process. What is the process followed by the bond price?
Advanced Engineering Mathematics
10th Edition
ISBN:9780470458365
Author:Erwin Kreyszig
Publisher:Erwin Kreyszig
Chapter2: Second-order Linear Odes
Section: Chapter Questions
Problem 1RQ
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Transcribed Image Text:14.10. 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(xo - x) dt + sx dz
where a, xp, and s are positive constants and dz is a Wiener process. What is the process
followed by the bond price?
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