The HJM Libor Model Does NOT Assume Which of the Following

question 2

Multiple Choice

The HJM libor model does NOT assume which of the following?

• A) no market frictions
• B) no credit risk
• C) competitive and well-functioning markets
• D) no arbitrage opportunities
• E) no interest rate risk

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Definitions:

Posterior Probability

The probability of assigning events or hypotheses after taking into consideration relevant evidence or background information.

Nominal Data

Represents data that can be categorized but not ranked or ordered numerically.

Interval Data

A type of numerical data that has meaningful differences between values and a true zero point.

Ordinal Data

Describes a type of data which is categorized into ordered but not necessarily equally spaced categories.