Suppose that the short rate is currently 4% and its standard deviation in a short period of
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Suppose that the short rate is currently 4% and its standard deviation in a short period of time Δt is 0.01 √Δt. What happens to this standard deviation when the short rate increases to 8% in (a) Vasicek's model; (b) Rendleman and Bartter's model; and (c) The Cox, Ingersoll, and Ross model?
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In Vasiceks model it stays at 001 In the Rendleman and Bartter model the coefficient of ...View the full answer
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