NO.PZ2020033001000071
问题如下:
Aria and Ben are discussing about time-dependent drift models.
Aria: Time-dependent drift models are flexible because volatility can change from period to period. And volatility must be an increasing function of short-term rate volatilities.
Ben: Time-dependent volatility functions are useful for pricing interest rate caps and floors.
Who is correct about the time-dependent drift models?
选项:
A.Aria only.
B.Ben only.
C.Both Aria and Ben.
D.Neither Aria nor Ben.
解释:
B is correct.
考点:Time-dependent drift model
解析:
Time-dependent volatility models are very flexible and can incorporate increasing, decreasing, and constant short-term rate volatilities between periods. This flexibility is useful for valuing interest rate caps and floors because there is a potential payout each period, so the flexibility of changing interest rates is more appropriate than applying a constant volatility model.
老师好,看了之前其他同学的类似提问,三三老师的回答是time-dependent volatility model更适合来算interest rate的cap 和 floor。但是对比基础班讲义第183页的例题,选项C,也提到了Time dependent drift model可以用来计算interest rate的cap 和 floor,因此我理解两个模型都可以用来算cap和floor吧?