Locating the Deterministic Assumption in a Bond Pricing Proof

Summary

The document asks where a proof in Damir Filipovic's term structure text uses the assumption that the world is deterministic. It identifies the notation for a zero-coupon bond price at time t with maturity T and observes that the result under discussion is known not to hold in general. The central learning issue is how a proof depends on deterministic evolution and what step would fail when uncertainty is present.

No theorem, proof passage, or proposed resolution is included, so the specific argument cannot be assessed from the document alone. In general, deterministic term structure reasoning differs from stochastic models because future states and bond prices can be random; a derivation may rely on fixed paths or omit conditional expectations and risk adjustments. Pinpointing the failure requires the actual result and proof, as well as the assumptions about pricing measure, rates, and market structure.

Key ideas

• The question concerns a proof about zero-coupon bond prices in a term structure model.
• The author wants to identify where determinism is used and what fails under uncertainty.
• The document does not include the theorem or proof needed to locate the step.
• Stochastic bond pricing can require expectations and risk adjustments absent from deterministic reasoning.

Tags

# Filipovic: Where is it used that the world is deterministic


# Filipovic: Where is it used that the world is deterministic












In this text (Damir Filipovic, Term-Structure Models, Springer, 2009) $P(t,T)$ denotes the price of a zero-coupon bond at time $t$ with maturity $T$. I cannot see where the proof uses the deterministic assumption. I know this result does not hold in general - but where does the argument fail if the world is not deterministic?

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