Learning Outcome, April syllabus

[cygnewhite]

I have some question concerning the "Learning Outcomes"

1. Explain why the time zero yield curve in the Vasicek and CIR models cannot beexogenously prescribed.

2.Explain the the B-S formula as a limited expected value for a lognormal distribution. (ASM lesson 7/sec7.2,7.3?)

3.Use variance reduction technique to accelerate convergence.

I do not quite understand what I have to know about those points.
If anyone knows, please explain to me! I'll appreciate that a lot!

[Abraham Weishaus]

1: You can't match the yield curve with only 4 parameters.
2: You found it.
3: Control variates.

[cygnewhite]

Thank you!

By the way, what do you mean by matching the yield curve?

[Abraham Weishaus]

A model which generates the yield of an t-year zero-coupon bond for all positive real numbers t.