Solve the equation with final data V(T) = 1. This is the value of a coupon bond

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Solve the equation

dV +K(t) = r(t)V, dt

with final data V(T) = 1. This is the value of a coupon bond when there is a known interest rate, r(t). What must we do if interest rates are not known in advance?

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Introduces Quantitative Finance

ISBN: 978-0470319581

2nd edition

Authors: Paul Wilmott

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Question Posted: Sep 23, 2020 05:58 AM

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Solve the equation with final data V(T) = 1. This is the value of a coupon bond

Question:

dV +K(t) = r(t)V, dt

Step by Step Answer:

To solve the given differential equation Vt Kt rt Vt Start by using the method of integrating factors multiply both sides of the equation by an integrating factor ...View the full answer

Introduces Quantitative Finance

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