The correct answer is C. In the Cox-Ingersoll-Ross (CIR) model, the basis-point volatility of the short-term rate is assumed to be proportional to the square root of the rate, and short-term rates cannot be negative. This is because the basis-point volatility is defined as $\sigma \times \sqrt{r}$, where $\sigma$ is the constant of proportionality and $r$ is the short-term rate. This relationship ensures that volatility is zero when the short-term rate is zero, which prevents negative rates. The CIR model is particularly useful for modeling interest rates because it allows for mean reversion and ensures that interest rates remain positive, which is a realistic assumption for financial markets.