In the Ho & Lee (1986) Model, the Parameter $\delta$ Plays a Crucial Role

question 6

Multiple Choice

In the Ho & Lee (1986) model, the parameter $\delta$ plays a crucial role. Which of the following statements best describes this parameter?

• A) \(\delta > 1\) .
• B) As \(\delta\) increases the volatility of interest rates increases.
• C) As \(\delta\) increases the volatility of interest rates decreases.
• D) \(\delta < 0\) .

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