Which of the Following Statements Is INCORRECT

question 13

Multiple Choice

Which of the following statements is INCORRECT?

• A) The single-period Heath-Jarrow-Morton (HJM)model is useful as a teaching tool and cannot be used to get realistic option values.
• B) The single-period HJM model can be used to illustrate key ideas underlying the pricing and hedging methodology.
• C) Interest rate derivatives like American options,futures contracts,and swaptions need at least two periods to capture their complexity.
• D) Interest rate derivatives like American options,futures contracts,and swaptions need at least three periods to capture their complexity.
• E) The term structure evolution underlying a properly specified binomial model becomes realistic when the time between periods is small and the number of periods is large.

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Definitions:

SRS

Simple Random Sampling, a fundamental sampling technique where each member of the population has an equal chance of being selected.

Margin Error

The highest degree to which the outcomes from a sample are anticipated to vary from the actual value of the population.

Sample Size

Refers to the number of observations or data points that are collected and used for statistical analysis.

P-values

The odds of observing test results as extreme or more extreme than the actual outcomes, under the presumption that the null hypothesis is accurate.