Question: Suppose that an interest rate, x, follows the process dx = a(x 0 x) dt + c x dz where , x 0 ,

Suppose that an interest rate, x, follows the process

dx = a(x₀ – x) dt + c √x dz

where , x₀, and x are positive constants. Suppose further that the market price of risk for x is λ. What is the process for in the traditional risk-neutral world?

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