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Suppose that the current daily volatilities of assets X , Y and Z are1.07% , 1.27% and 1.37% ,respectively. The prices of the assets at
Suppose that the current daily volatilities of assets X , Y and Z are1.07% , 1.27% and 1.37% ,respectively. The prices of the assets at close oftrading yesterday were $27, $37 and $47. Covariances are cov(X,Y) = 0.6 ;cov(X,Z) = 0.8; cov(Y,Z) = 0.9 Correlations and volatilities are updated using Risk Metrics EWMA model.with lamda= 0.97. If the prices ofthe three, assets at close of trading today are $25 , $35 and $45, forecast the correlation coeffcients for today.
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