Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please use excel**** Suppose that the price of stock X at close of trading yesterday was $100 and its volatility was estimated as 1.4% per

image text in transcribed

please use excel****

Suppose that the price of stock X at close of trading yesterday was $100 and its volatility was estimated as 1.4% per day. The price of X at the close of trading today is $97. Suppose further that the price of Asset Y at the close of trading yesterday was $40, its volatility was estimated as 1% per day, and its correlation with X was estimated as 0.5. The price of Y at the close of trading today is unchanged. Update the volatility of X and Y and the correlation between X and Y using a. The EWMA model with = 0.94. b. The GARCH(1,1) model with a = 0.000002, a=0.04, and B = 0.94. Suppose that the price of stock X at close of trading yesterday was $100 and its volatility was estimated as 1.4% per day. The price of X at the close of trading today is $97. Suppose further that the price of Asset Y at the close of trading yesterday was $40, its volatility was estimated as 1% per day, and its correlation with X was estimated as 0.5. The price of Y at the close of trading today is unchanged. Update the volatility of X and Y and the correlation between X and Y using a. The EWMA model with = 0.94. b. The GARCH(1,1) model with a = 0.000002, a=0.04, and B = 0.94

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Personal Finance

Authors: Vickie L Bajtelsmit

1st Edition

0470905158, 9780470905159

More Books

Students also viewed these Finance questions

Question

1. Offer surprise rewards for good participation in class.

Answered: 1 week ago

Question

5. It is the needs of the individual that are important.

Answered: 1 week ago