Explain the volatility property found in an interest-rate model
What will be an ideal response?
The volatility term refers to that variability of the interest rate or the short rate. The symbol ? is used in interest rate models to represent the volatility and is simply the standard deviation of the changes in the short rate. Like the drift term, assumptions are made such as its dependency on the level of the short rate. There have been several formulations of the dynamics of the volatility term. If volatility is assumed to depend on time, then we express volatility as?(r,t) where r is the short rate and t is the change in time (or time period being considered). If volatility is not assumed to depend on time, then ?(r,t) = ?(r).In general, the dynamics of the volatility term can be specified as?r?dzwhere ? is equal to the constant elasticity of variance. This equation is called the constant elasticity of variance model (CEV model).
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Babuca Corporation has provided the following production and total cost data for two levels of monthly production volume. The company produces a single product. Production volume 12,600?units 14,000?unitsDirect materials$763,560? $848,400? Direct labor$270,900? $301,000? Manufacturing overhead$1,010,600? $1,039,440? The best estimate of the total cost to manufacture 13,300 units is closest to: (Round your intermediate calculations to 2 decimal places.)
A. $2,023,710 B. $2,093,640 C. $2,163,570 D. $2,116,950
After the death of Horace, the remaining two joint tenants of the luxury restaurant Rendezvous became the owners of Horace's interest in the property automatically. This feature of their concurrent ownership is called ________
A) quiet title action B) adverse possession C) nonconforming use D) right of survivorship
A mutual fund's net asset value (NAV) reflects
A) the market value of all its holdings. B) the amount distributed to shareholders each year. C) its revenues minus its expenses. D) its per-share value in a bankruptcy liquidation.
A travel agent adds value by creating an itinerary that includes transportation, accommodations, and activities that are customized to your budget and travel dates. In terms of the value-chain analysis, this is an example of a ________ organization.
A. retail B. service C. travel D. manufacturing