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A risk manager is constructing a term structure model and intends to use the Cox-Ingersoll-Ross Model. Which of the following describes this model?
A
The model presumes that the volatility of the short rate will increase at a predetermined rate.
B
The model presumes that the volatility of the short rate will decline exponentially to a constant level.
C
The model presumes that the basis-point volatility of the short rate will be proportional to the rate.
D
The model presumes that the basis-point volatility of the short rate will be proportional to the square root of the rate.
