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1. (20 pts) Answer briefly the following questions a) How to understand volatility? How to understand uncertain and risk? b) Describe one test statistics that

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1. (20 pts) Answer briefly the following questions a) How to understand volatility? How to understand uncertain and risk? b) Describe one test statistics that can be used to evaluate model adequacy and explain how it works using plain words. c) Provide two reasons for the observed significant first order autocorrelation of high frequency data

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