Suppose that the tenor structure T? 1 , T 0 , . . . , T N
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Suppose that the tenor structure T?1, T0, . . . , TN is equispaced, with ?t = Tn ? Tn?1 and T?1 = 0. For 0 ? t ? TN, the discretely rebalanced bank account Bd(t) has present value.
with
where ?(x) is again the Heaviside-?-function. Use Theorem 17.2 on page 390 to prove that Xt has the dynamics
Transcribed Image Text:
Ba(1) = X,PN,(1), %3D N-1 N, X, = [] and N, = 0(t - T„), n=0 P„(Tn-1) n=0
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