Following the n-factor HJM framework, show that the dynamics of r(t) under the risk neutral measure [see
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Following the n-factor HJM framework, show that the dynamics of r(t) under the risk neutral measure [see (7.4.8b)] can be expressed as
where F(t,T) is defined in (7.4.7). Can you provide a financial interpretation of the result?
Transcribed Image Text:
dr(t) = Ә at n F(t, T) 1, T) + Σof (1,7) dz;(1), T) T=t i=1
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