Hibbert Turnbull ESG - real world vs risk neutra

[Gareth]

In the paper:

http://www.actuaries.org.uk/files/pd...01/hibbert.pdf

a 2 factor Vasicek model is calibrated for the real interest rate and inflation under a real probability measure.

The authors then price bonds under this calibration using the standard bond valuation formula for this model...

I have to wonder one thing. The bond valuation formula relies on the parameters coming from a risk-neutral calibration, yet the paper does not have a parameter for the market price of risk, so it seems they plug in the real world parameters into the risk neutral pricing formula.

This seems wrong. What do you think?

Similarly, in the CAS / SOA model here: http://www.casact.org/research/econ/section5.pdf

they do a real world calibration and again are using the risk neutral bond pricing formula.

Have I missed something here? I hope so...