- CFA Exams
- CFA Exam: Level II 2021
- Study Session 12. Fixed Income (1)
- Reading 33. The Arbitrage-Free Valuation Framework
- Subject 2. Interest Rate Trees and Arbitrage-Free Valuation
CFA Practice Question
An interest rate tree is based on ______ and ______.
Correct Answer: An interest rate model and assumption of interest rate volatility.
User Contributed Comments 1
| User | Comment |
|---|---|
| connor15 | The relationship among the set of rates associated with each individual nodal period is a function of the interest rate volatility assumption of the model being employed to generate the tree. |