The Term "No-Arbitrage" Class of Term-Structure Models Refers to

question 5

Multiple Choice

The term "no-arbitrage" class of term-structure models refers to

• A) Models which focus on bond prices directly rather than interest rates.
• B) Models which work under the martingale measure directly rather than under the actual or "statistical" measure.
• C) Models whose parameters never have to be re-estimated since no-arbitrage ensures that they cannot change from day to day.
• D) Models which are capable of matching the observed term-structure perfectly.

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