Chartered Financial Analyst Level 2
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Which of the following statements regarding the calibration of a binomial interest rate tree to the term structure is most accurate?
Which of the following statements regarding the calibration of a binomial interest rate tree to the term structure is most accurate?
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A
The interest rate model used in the process is based on the normal distribution
B
The volatility assumption used in the binomial tree impacts the valuation of an option-free bond
C
The interest rate tree is fit to the current yield curve so that the model produces the benchmark bond values
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