Financial Risk Manager Part 2

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The practical estimation method for Gauss+ model's parameters proceeds in stages, with each stage estimating a subset of the model's parameters. Which of the following statements is correct regarding the estimation method?

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In order to estimate the mean reversion parameters, one should first regress the changes in the zero yields of medium-long-term bonds on the changes in the zero yields of various terms.

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In order to estimate the value to which the short-term rate reverts over the very long-term (i.e., the constant $\mu$ ), we should ensure that the term structure of volatilities in the model matches the term structure of volatilities in the data as closely as possible.

Once estimated, the short-term rate, medium-term factor and long-term factor are set equal to the fed funds target rate, the one-year rate that is two-year forward and the one-year rate that is ten-year forward, respectively.

This practical estimation method is significantly easier to implement than the maximum likelihood methods that are standard in the term structure literature.