An exponential-affine short rate bond model is one
A) That most bond traders have an affinity for.
B) Where the bond prices are linear in the short-rate.
C) Where the logarithm of bond prices is linear in the short rate.
D) Where the bond price is based on discrete compounding.

Question

An exponential-affine short rate bond model is one 
A) That most bond traders have an affinity for.
B) Where the bond prices are linear in the short-rate.
C) Where the logarithm of bond prices is linear in the short rate.
D) Where the bond price is based on discrete compounding.

Quizplus · Accepted Answer

In an exponential-affine short rate bond model, the logarithm of bond prices is linear in the short rate. This model is often used in finance for interest rate modeling and bond pricing.

An Exponential-Affine Short Rate Bond Model Is One