What are random factors for risk-neutral drifts
What are random factors for risk-neutral drifts?
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As along with the HJM model the initial data are the forward rates therefore bond prices are calibrated automatically. One identifies a number of random factors and their volatilities and correlations among them, and the requirement of no arbitrage after that determines the risk-neutral drifts. Even though B, G and M have their names connected with this idea many others worked on this simultaneously.
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