Fund manager, Q-Group, wants to be able to make return volatility predictions. They use the Exponentially Weighted Moving Average (EWMA) technique to model the daily volatility of the rate of return on a security as: of = trz + (1 - 1)02_1 where rt is the centred daily rate of return on the security (the daily rate of return after subtracting the average daily rate of return over the sample). 1 =0.5, rt = 5%, and of_1 =20. A) Showing your working, what is the estimate of of ? [3 points] B) Showing your working, what is the estimate of 0+1 ? [3 points] C) If the fund manager decreased the value of from 0.5 to 0.1, what would that imply about the impact, on volatility estimates, of a daily return that was a lot larger than average? [2 points] D) The fund manager wants to extend the model of of to include an additive seasonal component with a weekly cycle. Write out the Holt-Winters model that they should use. [2 points] Fund manager, Q-Group, wants to be able to make return volatility predictions. They use the Exponentially Weighted Moving Average (EWMA) technique to model the daily volatility of the rate of return on a security as: of = trz + (1 - 1)02_1 where rt is the centred daily rate of return on the security (the daily rate of return after subtracting the average daily rate of return over the sample). 1 =0.5, rt = 5%, and of_1 =20. A) Showing your working, what is the estimate of of ? [3 points] B) Showing your working, what is the estimate of 0+1 ? [3 points] C) If the fund manager decreased the value of from 0.5 to 0.1, what would that imply about the impact, on volatility estimates, of a daily return that was a lot larger than average? [2 points] D) The fund manager wants to extend the model of of to include an additive seasonal component with a weekly cycle. Write out the Holt-Winters model that they should use. [2 points]