PPT Slide

Economy in Jarrow-Turnbull model

Two classes of zero-coupon bonds are traded:-

1. Default-free, zero coupon bonds of all maturities

P0(t, T) denotes the time t dollar value of the default-free zero-coupon

bond with unit par;

M(t) denotes the time t dollar value of the money market account

initialized with one dollar at time 0.

2. XYZ zero coupon risky bonds of all maturities

v1(t, T) denotes the time t dollar value of XYZ bond with unit par.