hw3 - dr 2 ( t ). 2. Consider the process M t = B 2 t-t ,...

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AMS517 Homework 3 (Due April 25) 1. Consider the Cox-Ingersoll-Ross model for interest rate dr ( t ) = a ( b - cr ( t )) dt + σ p r ( t ) dB ( t ) , where a,b,c,σ are positive constants. Use Ito’s formula to compute
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Unformatted text preview: dr 2 ( t ). 2. Consider the process M t = B 2 t-t , where B t is standard Brownian motion with initial value B = 0. Show that M t is a martingale....
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