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At the end of Thursday, the volatility of asset A is 2% per day and the volatility of asset B is 1% per day. Also
At the end of Thursday, the volatility of asset A is 2% per day and the volatility of asset B is 1% per day. Also the covariance between the assets is 0.0001. During Friday asset A produces a return of 3% and asset B produces a return of zero. An EWMA model with = 0.9 is used. Answer the following questions giving two decimal place accuracy. What is an estimate of the correlation between the assets at the end of Friday?
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