easy · Quantitative Finance stochastic
A 2-year zero-coupon bond is currently trading at $0.94. If the short rate follows the Vasicek model, what does this price imply about the discount factor used in interest rate modeling?
- It represents the present value of $1 received in 2 years.
- It is the expected future short rate at time T=2.
- It suggests the yield curve is currently inverted.
- It is the risk-neutral probability of the rate staying positive.
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