问题如下：
Aria and Ben are discussing about time-dependent drift models.
Aria: Time-dependent drift models are flexible because volatility can change from period to period. And volatility must be an increasing function of short-term rate volatilities.
Ben: Time-dependent volatility functions are useful for pricing interest rate caps and floors.
Who is correct about the time-dependent drift models?
选项：
A. Aria only.
B. Ben only.
C. Both Aria and Ben.
D. Neither Aria nor Ben.
解释：
B is correct.
考点：Time-dependent drift model
解析：
Time-dependent volatility models are very flexible and can incorporate increasing, decreasing, and constant short-term rate volatilities between periods. This flexibility is useful for valuing interest rate caps and floors because there is a potential payout each period, so the flexibility of changing interest rates is more appropriate than applying a constant volatility model.
关于Gaps和Floors这里首先我没有理解，其次在基础班讲义中183页例题说的是Ho-Lee具有这个特点，这道题的解释部分说的是Model3，已经晕了…
