View the step-by-step solution to:

Question

1.    The most recent estimate of the daily volatility of an asset is 1.5% and the price of the asset at the

close of trading yesterday was $30.00. The parameter λ in the EWMA model is 0.94. Suppose that the price of the asset at the close of trading today is $30.50. How will this cause the volatility to be updated by the EWMA model?





2)   Suppose that GARCH(1,1) parameters have been estimated as ω = 0.000003, α = 0.04, and β = 0.94. The current daily volatility is estimated to be 1%. Estimate the daily volatility in 30 days.

Recently Asked Questions

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Ask Expert Tutors You can ask 0 bonus questions You can ask 0 questions (0 expire soon) You can ask 0 questions (will expire )
Answers in as fast as 15 minutes