Suppose that the tenor structure T? 1 , T 0 , . . . , T N

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Suppose that the tenor structure T?₁, T₀, . . . , T_N is equispaced, with ?t = T_n ? T_n?1 and T_?1 = 0. For 0 ? t ? T_N, the discretely rebalanced bank account B_d(t) has present value.

with

where ?(x) is again the Heaviside-?-function. Use Theorem 17.2 on page 390 to prove that X_t has the dynamics

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A First Course in Quantitative Finance

ISBN: 978-1108419574

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Authors: Thomas Mazzoni

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Question Posted: Feb 19, 2020 10:14 AM

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Suppose that the tenor structure T? 1 , T 0 , . . . , T N

Question:

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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Theorem 172 states that if X is a jumpdiffusion process of the f...View the full answer

A First Course in Quantitative Finance

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