THE BOND MARKETS: CONCLUDING COMMENTS 3


Appendix В. Deriving Moments from the Characteristic Function
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We can now evaluate the moments for the distribution of the interest rate r which are:
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Appendix С. Derivation of the Bond Pricing Equation

Denote present time by the variable £, the time point at the maturity of a bond by T, and the time to maturity r — T — t. Define the price of a zero-coupon bond to be P(r, r); we assume that all factors determining the value of this bond are captured in equation (2.1) above.

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