Multiple Choice
"No-arbitrage" models of the interest rate differ from "equilibrium" models of the interest rate in that
A) They have a larger number of free parameters enabling them to fit the yield curve exactly.
B) They do not admit arbitrage whereas an equilibrium model may admit arbitrage under some conditions.
C) Equilibrium models were derived in the academic literature whereas whereas no-arbitrage models were developed mainly by practitioners.
D) They allow for the possibility that the market is in disequilibrium
Correct Answer:
Verified
Correct Answer:
Verified
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Q5: The term "no-arbitrage" class of term-structure models
Q6: In the Black-Scholes formula, interest rates are
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Q8: In the Black-Scholes framework, return volatility is
Q9: "Equilibrium" models of the term-structure <br>A) Are
Q10: Which of the following is not sufficient
Q12: Which of the following statements is implied
Q13: Suppose that the one-year and two-year
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