Question: Refer to Exercise 1 and set up the trading strategy, as shown in Example 16.1. Check that the one-step replication strategy works, according to the

Refer to Exercise 1 and set up the trading strategy, as shown in Example 16.1. Check that the one-step replication strategy works, according to the model, by replicating Table 16.2 for this exercise.
In Exercise 1
Today is September 25, 2008. Table 15.4 in Chapter 15 contains the STRIPS data today (see Exercise 12 in Chapter 15). According to the Vasicek model, is there any trading opportunity? Fit the Vasicek model to the data, find pricing errors and discuss the available trading opportunities. Be explicit on how you would exploit these trading opportunities, that is, the long/short positions.

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