Question 1
Which of the following describes the primary purpose of ‘objective functions’ in rate calibration?
Question 2
In the context of rate calibration, what is the main advantage of using ‘parametric fitting’?
Question 3
What is the primary reason that ‘numerical optimization’ techniques are essential for rate calibration?
Question 4
If a calibrated interest rate model consistently ‘underprices’ certain derivatives compared to their market prices, what is a likely implication?
Question 5
Consider an objective function given by $f(x) = (x - 7)^2$. What value of $x$ minimizes this function?
