a. In the HJM libor model, is it a simple interest rate or a continuously compounded interest
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b. Why is this difference important (hint: relates to Black’s formula)?
c. In the HJM libor model, is the volatility of the simple forward rate of interest a constant, or does it depend on time?
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a Assumption A6 is for a simple interest rate denoted iT T b This difference is important f...View the full answer
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Related Book For
An Introduction to Derivative Securities Financial Markets and Risk Management
ISBN: 978-0393913071
1st edition
Authors: Robert A. Jarrow, Arkadev Chatterjee
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