All, I am preparing for MFE (financial engineering). I could not thin of any other forum where i could seek help for clearing my doubts on financial products.
Dear experts, is my below understanding correct?
Is the r>-1 is coming from this statement
&&&1 + r&&&
if 1+r>0, then r>-1
Extract from Stochastic Calculus for Finance 1
We introduce also an interest rate 1n. One dollar invested in the money
market at time zero will yield 1 + r dollars at time one. Conversely, one dollar
borrowed from the money market at time zero will result in a debt of &&&1 + r&&&
at time one. In particular, the interest rate for borrowing is the same as the
interest rate for investing. It is almost always true that r >= 0, and this is
the case to keep in mind. However, the mathematics we develop requires only
that r > -1.