Which of the following statements about the binomial interest rate option pricing model is INCORRECT?
A) The binomial model is popular because it is accessible and easy to understand.
B) The binomial model is a useful teaching tool.
C) The binomial model is a versatile model that can price a variety of derivatives.
D) The binomial model illustrates the main tenets of martingale pricing,the key technique that lies at the heart of derivative pricing.
E) The binomial model is more accurate than the Heath-Jarrow-Morton model because it makes a more realistic assumption about the bond price evolution than the HJM model.
Correct Answer:
Verified
Q3: Suppose that a company has issued a
Q4: Use the following tree to answer the
Q5: The writer of an interest rate floor
Q6: Which of the following statements is correct?
A)
Q7: The following is NOT an assumption underlying
Q9: An interest rate cap is:
A) a European
Q10: Assume zero-coupon bond prices are B(0,0)=$1,B(0,1)= $0.967846,B(0,2)=$0.943010.What
Q11: Which of the following statements about an
Q12: The writer of an interest rate cap:
A)
Q13: A necessary and sufficient condition to
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