2 Ch 2 Questions and answers.docx - Ch 2 Questions and Answers Question 1 Suppose that observations on an exchange rate at the end of the past 11 days

2 Ch 2 Questions and answers.docx - Ch 2 Questions and...

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Ch 2 Questions and Answers Question 1Suppose that observations on an exchange rate at the end ofthe past 11 days were 0.7000, 0.7010, 0.7070, 0.6999,0.6970, 0.7003, 0.6951, 0.6953, 0.6934, 0.6923, 0.6922.Estimate the daily volatility. Question 2 The daily volatility of an asset is 2%. What is the standarddeviation of the percentage price change over 3 days? Question 3 1
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The yearly volatility of an asset is 25%. What is thestandard deviation of the percentage price change in onetrading day?Assume that a normal distribution with zero mean, estimate95% confidence limits for the percentage price change inone day. Question 4Why do traders assume 252 rather than 365 days in a yearwhen using volatilities? Answers: 2
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