Consider a LIBOR Markov-functional model specified using the numeraire pair and having a driving Markov process x satisfying where W is a standard Brownian motion under and a are constants. Show...

Consider a LIBOR Markov-functional model specified using the numeraire pair

and having a driving Markov process x satisfying

where W is a standard Brownian motion under

and a are constants. Show that if this model is calibrated to caplet prices as given by the Hull–White model discussed in Exercise 16 then this Markov-functional model coincides with the Hull–White model on the ‘grid’, i.e. the functional forms

are as for the Hull–White model.