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Lecture_07 - 7 Bond Trading Strategies An Example A...

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1 7 Bond Trading Strategies – An Example A Motivation This chapter shows how to use the concepts of trading strategies, arbitrage opportunities and complete markets to investigate mispricings within the yield curve. Taken as given are the stochastic processes for a few zero-coupon bonds, the stochastic process for the spot rate, and the assumption that there are no arbitrage opportunities. The purpose is to find the arbitrage-free prices of all the remaining zero-coupon bonds.
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