Financial Risk Manager Part 2
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As a hedge fund risk manager evaluating various models for term structure modeling, especially those that incorporate mean reversion and risk premium, which of the following statements accurately describes the Vasicek model?
A
It incorporates the mean reversion feature and its drift is always zero.
B
It incorporates the mean reversion feature and models the risk premium as a component of a constant or changing drift.
C
It cannot incorporate risk premium and its drift is always zero.
D
It cannot capture the mean reversion feature but can be used to model the time-varying risk premium.