Problem bank

Problem 138 of 333HardStochastic CalculusP138

Solve the Vasicek SDE

  1. Solve drt=λ(θ−rt) dt+σ dWtdr_t = \lambda(\theta - r_t)\,dt + \sigma\,dW_t with λ>0\lambda > 0. What is rtr_t's distribution? What is its mean and variance?