Suppose that x is the yield on a perpetual government bond that pays interest at the rate
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Suppose that x is the yield on a perpetual government bond that pays interest at the rate of $1 per annum. Assume that x is expressed with continuous compounding, that interest is paid continuously on the bond, and that x follows the process
dx = a(x0 - x) dt + sxdz
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Oct 2017 Feb 2019 Aug 2019 Feb 2018 Aug 2018 Date Spot Price Mar 2018 Futures Price Sep 2018 Futures Price Mar 2019 Futures Price Sep 2019 Futures Price 372.00 377.00 388.00 369.00 365.00 372.30 369.10 372.80 370.20 364.80 364.30 376.70 370.70 388.20 364.20 376.50
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The process followed by B the bond price is from Its lemma In this case s...View the full answer
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