Part Two
Term Structure of Interest Rates

The price c02-math-001 at time t of a default-free zero-coupon bond with unit face value maturing at time s is given by the equation

equation

where c02-math-002 is the short interest rate, c02-math-003 is a Wiener process constituting a source of risk, and c02-math-004 is the market price of risk. (page 38)

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