Suppose that an interest rate, x, follows the process dx = a(x 0 x) dt +

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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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Options Futures and Other Derivatives

ISBN: 978-0134472089

10th edition

Authors: John C. Hull

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Question Posted: Feb 12, 2018 12:29 PM

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Suppose that an interest rate, x, follows the process dx = a(x 0 x) dt +

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The process for in a risk neutral w...View the full answer

Options Futures and Other Derivatives

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