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 ...
Let you have several issuers, and let each issuer have its yield curve built up with liquid plain vanilla fixed rate bonds. Each yield curve has its slope and its curvature, and they obviously change ...
to limit interest rate paths to a 'reasonable' range (if we could define reasonable). Now we calibrate log-normal skew and mean reversion monthly to robust basket of atm swaptions and in and out ...