Recall that show that the forward rate is given by where the stochastic discount factor is defined

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Recall that

B(r, t) = exp ) = exp(- [* F(t, u) du) = E'o[exp(- [ r(u) du)].

show that the forward rate is given by

F(t, T): E[r (T)d(t, T)] E[d(t, T)] where the stochastic discount factor is defined by

T 1 = exp(- [ r(u) du). d(t, T) = exp

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Mathematical Models Of Financial Derivative

ISBN: 9783642447938

2nd Edition

Authors: Yue-Kuen Kwok

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Question Posted: Dec 05, 2023 12:57 AM

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Recall that show that the forward rate is given by where the stochastic discount factor is defined

Question:

B(r, t) = exp ) = exp(- [* F(t, u) du) = E'o[exp(- [² r(u) du)].

Step by Step Answer:

The expression you provided seems to be incomplete but I can help you derive the ...View the full answer

Mathematical Models Of Financial Derivative

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