Consider a One-Factor HJM Model on a Binomial Model with Time

question 4

Multiple Choice

Consider a one-factor HJM model on a binomial model with time steps of one year and a probability of an up shift of $q$ .Each $j$ -th forward rate has constant volatility $\sigma ( j )$ .For each forward period of one year what is the risk-neutral drift term in the $n$ -th period equal to?

• A) \(\alpha ( n ) = \ln \left[ q \exp \left( \sum _ { j = 1 } ^ { n } \sigma ( j ) \right) + ( 1 - q ) \exp \left( - \sum _ { j = 1 } ^ { n } \sigma ( j ) \right) \right] - \sum _ { j = 1 } ^ { n - 1 } \alpha ( j )\)
• B) \(\alpha ( n ) = \ln [ q \exp ( \sigma ( n ) ) + ( 1 - q ) \exp ( - \sigma ( n ) ) ]\)
• C) \(\alpha ( n ) = \exp \left[ q \ln \left( \sum _ { j = 1 } ^ { n } \sigma ( j ) \right) + ( 1 - q ) \ln \left( - \sum _ { j = 1 } ^ { n } \sigma ( j ) \right) \right] - \sum _ { j = 1 } ^ { n - 1 } \alpha ( j )\)
• D) \(\alpha ( n ) = \exp [ q \ln ( \sigma ( n ) ) + ( 1 - q ) \ln ( - \sigma ( n ) ) ]\)

Understand the concept and importance of decentralization in decision-making processes.

Understand the definition and significance of kinship in human societies.

Recognize the functions and problems solved by social organizations beyond the family unit.

Identify the tasks and importance of kinship terminologies.

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A moral or legal entitlement to have or do something, emphasizing a fair treatment or ownership of a concept, item, or privilege.

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