I am a bit new to this, and am trying to understand the concepts of the risk neutrality in interest-rate models. What I can't seem to understand is why the Vasicek model is risk-neutral? Following ...
So basically $dS_t=\mu S_tdt+\sigma S_tdWt$ and $\mu=r-\frac12\sigma^2$ I have just been thinking about this later equation. This is very interesting because it ties together risk-free ...