Which of the Following Is a Limitation of Using the Black

question 27

Multiple Choice

Which of the following is a limitation of using the Black model to price interest rate options?

• A)the risk-free rate is not constant
• B)the volatility is not constant
• C)interest rates are not lognormally distributed
• D)all of the above
• E)none of the above

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Definitions:

Null Hypothesis

A statement in statistical analysis that assumes no effect or no difference between groups or variables.

One-Sample Test

A statistical procedure used to determine whether a sample comes from a population with a specific characteristic.

Hypothesized Value

A specific value or parameter that a researcher expects to find according to a certain hypothesis.

Online Edition

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