CFA Practice Question

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CFA Practice Question

The short interest rate is mean reverting in the Vasicek model. This means:

A. Rates revert to a long-time level.
B. Rates are close to the mean.
C. The average of short rates is its mean.
Correct Answer: A

It assumes the economy has a constant long-run interest rate that the short-term interest rate converges to over time. The CIR model assumes this too.

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