In the solution regarding the limitation of a one-factor model, what does it mean by: sustained periods have been observed historically with all combinations of high/low interest rates and high/low volatility. This would appear to be inconsistent with a one-factor model Thanks!... in addition to the tons of questions i posted unanswered here.
Q&A Bank 4.6 This indicates that there are at least two different factors driving interest rates and volatility, otherwise you wouldn't get all these combinations over sustained periods.
