Refer to Example 16.11. Let (F(t)) be the forward rate from 0 to (t). By the basic

Question:

Refer to Example 16.11. Let $F(t)$ be the forward rate from 0 to $t$. By the basic definition of the forward rate, we have the identity

\[e^{-F(t) t}=P(r, 0, t)\]

Find an explicit formula for $F(t)$.

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Investment Science

ISBN: 9780199740086

2nd Edition

Authors: David G. Luenberger

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Question Posted: Apr 20, 2024 12:11 PM

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Refer to Example 16.11. Let (F(t)) be the forward rate from 0 to (t). By the basic

Question:

Example 16.11 (A Ho-Lee solution) As a somewhat more complex example of an analytic solution consider the special case where the short rate is governed by dr = adt + dz.

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Investment Science

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