Which of the Following Is NOT Part of Calibration Method

question 24

Multiple Choice

Which of the following is NOT part of calibration method used by the RBC theorists to analyze the business cycles?

• A)Write a specific classical model of the economy.
• B)Use the previous studies to assign the parameters of the model.
• C)Examine the effects of random shocks on the main variables of the model.
• D)Estimate the parameters of the model to predict the future values of the model.

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Definitions:

Risk-free Rate

The theoretical rate of return on an investment with zero risk, typically represented by U.S. Treasury securities.

Modified Duration

A measure of a bond's price sensitivity to changes in interest rates, taking into account the bond's yield, coupon, and time to maturity.

Hedge Ratio

A ratio used to measure the amount of exposure reduced by hedging, typically in the context of derivatives and risk management.

T-bond Futures

Futures contracts that are agreements to buy or sell U.S. Treasury bonds at a predetermined price on a specified date in the future.