Let L(t,T ) denote the time t LIBOR process L t (T, T over the period (T, T , and i L (t, T ) be its ith component of volatility function see (7 4 26) From the relation and the properties one obtains Suppose we impose the condition where k is the largest integer less than or equal to (T t) og (t, T...

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Let L(t,T ) denote the time-t LIBOR process L t (T, T + ] over the period

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Let L(t,T ) denote the time-t LIBOR process L_t(T, T + δ] over the period (T, T + δ], and σⁱ_L(t, T ) be its ith component of volatility function [see (7.4.26)]. From the relation

og (t, T +8) o(t, T) = SL (t, T) 1 + 8L(t, T) o (t, T), and the properties

o(t, t) = o(t, t) = 0,

one obtains

og (t, t + 8) = 0. Suppose we impose the condition

Show that og (t, T) = 0 for T (t, t+8). of(t, T) = k i=1 SL (t, T-k8) 1+8L(t, T - k8) -ot(t, T - k8),

where k is the largest integer less than or equal to (T − t)/δ.

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Mathematical Models Of Financial Derivative

ISBN: 9783642447938

2nd Edition

Authors: Yue-Kuen Kwok

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Question Posted: Nov 30, 2023 07:31 AM

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Let L(t,T ) denote the time-t LIBOR process L t (T, T + ] over the period

Question:

og (t, T +8) − o(t, T) = SL (t, T) 1 + 8L(t, T) oį (t, T),

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Mathematical Models Of Financial Derivative

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