Hull_OFOD9e_MultipleChoice_Questions_Only_Ch23

# Hull_OFOD9e_MultipleChoice_Questions_Only_Ch23 - Hull...

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Hull: Options, Futures, and Other Derivatives, Ninth Edition Chapter 23: Estimating Volatilities and Correlations Multiple Choice Test Bank: Questions 1. How many parameters are necessary to define an EWMA model A. 1 B. 2 C. 3 D. 4 2. How many parameters are necessary to define a GARCH (1,1) model 3. At the end of Thursday, the estimated volatility of asset A is 2% per day. During Friday asset A produces a return of 3%. An EWMA model with lambda equal to 0.9 is used. What is an estimate of the volatility of asset A at the end of Friday? 4. At the end of Thursday, the estimated volatility of asset B is 1% per day. During Friday asset B produces a return of zero. An EWMA model with lambda equal to 0.9 is used. What is an estimate of the volatility of asset A at the end of Friday? 5. At the end of Thursday, the estimated covariance between assets A and B is 0.0001. During Friday asset A produces a return of 3% and asset B produces a return of zero. An EWMA model with lambda equal to 0.9 is used. What is an estimate of the covariance at the end of Friday? A. 0.000090 B. 0.000081 C. 0.000100 D. 0.000095

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