Suppose the (vector) Markov process Xt, has the following dynamics, where the error term is jointly normal
Question:
-1.png){kind=small}
has the following dynamics,
-2.png)
where the error term is jointly normal and serially uncorrelated. Suppose rt is a short rate, while Rt is a long rate.
(a) Derive a univariate representation for the short rate rt.
(b) According to this representation, is rt a Markov process?
(c) Under what conditions, if any, would the univariate process rt be Markov?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
a A univariate representation for the short rate is provided ...View the full answer
Answered By
Ali Khawaja
my expertise are as follows: financial accounting : - journal entries - financial statements including balance sheet, profit & loss account, cash flow statement & statement of changes in equity -consolidated statement of financial position. -ratio analysis -depreciation methods -accounting concepts -understanding and application of all international financial reporting standards (ifrs) -international accounting standards (ias) -etc business analysis : -business strategy -strategic choices -business processes -e-business -e-marketing -project management -finance -hrm financial management : -project appraisal -capital budgeting -net present value (npv) -internal rate of return (irr) -net present value(npv) -payback period -strategic position -strategic choices -information technology -project management -finance -human resource management auditing: -internal audit -external audit -substantive procedures -analytic procedures -designing and assessment of internal controls -developing the flow charts & data flow diagrams -audit reports -engagement letter -materiality economics: -micro -macro -game theory -econometric -mathematical application in economics -empirical macroeconomics -international trade -international political economy -monetary theory and policy -public economics ,business law, and all regarding commerce
1+ Reviews
10+ Question Solved
Related Book For 
An Introduction to the Mathematics of Financial Derivatives
ISBN: 978-0123846822
3rd edition
Authors: Ali Hirsa, Salih N. Neftci
Question Posted:
