- CFA Exams
- CFA Level I Exam
- Study Session 12. Fixed Income (1)
- Reading 32. The Term Structure and Interest Rate Dynamics
- Subject 6. Modern Term Structure Models

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**CFA Practice Question**

What is the different assumption between the CIR model and the Vasicek model?

A. One model assumes mean reversion while the other does not.

B. One model assumes constant interest rates volatility while the other does not.

C. One is a single-factor model while the other is not.

**Explanation:**They both are single-factor models. They both assume mean reversion. However, the Vasicek model assumes constant interest rates while the CIR model assumes that interest rate volatility increases with increases in the level of interest rates.

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