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Now I'm studying this textbook ( Fixed Income Securities by Veronesi ). But this page gets me some trouble.

I know that yield and Bond Price have negative relationship. But in this image, it says sigma_z(Risk)'s negative sign captures this risk. What does it mean totally? Why it should have negative sign to explain the fact that Bond yield and Bond Price have negative relationship?

Also, See Lambda term. it says lambda(r,t) < 0 would imply the higher risk premium that investors require in order to hold long term bonds. What is the reason? Why below zero imply the higher risk premium that investors require in order to hold long term bonds ?

I'm studying this textbook by myself and the contents is not enough to understand this intuition. I need your help sincerely.

Thanks.

user13232877
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    Is $X$ in 18.10 the Standard Brownian motion? Otherwise in general, I find this textbook poorly written, based on the sample you've pasted above. It's rather confusing and I find some of the equations non-rigorous (the way they are written seems highly non-standard, compared to other books). I am curious what others might say about the text, but I wouldn't pick this textbook personally to study finance, it's not clearly conveyed in my opinion. This reference might be more digestible. – Jan Stuller Nov 04 '20 at 17:13
  • Thank you for giving me the reference. It seems to be very helpful for me. Also, You’re right. X is standard Brownian motion. – user13232877 Nov 04 '20 at 23:31

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