two-factor Vasicek model of Subsection 10.2.1

two-factor Vasicek model of Subsection 10.2.1

Fix a maturity T > 0. In the two-factor Vasicek model of Subsection 10.2.1, consider the…
Fix a maturity T > 0. In the two-factor Vasicek model of Subsection 10.2.1, consider the T-forward measure T of Definition 9.4.1:

(ii) Consider a call option on a bond maturing at time > T. The call expires at time T and has strike price K. Show that at time zero the risk-neutral price of this option is

appearing in the exponent in (10.7.19) is normally distributed.
(iv) It is a straightforward but lengthy computation, like the computations in Exercise 10.1, to determine the mean and variance of the term X. Let us call its variance σ2 and its mean