Question
Suppose the prices of two assets at close of trading yesterday are $20 (asset A) and $40 (asset B), respectively, and the covariance estimate between
Suppose the prices of two assets at close of trading yesterday are $20 (asset A) and $40 (asset
B), respectively, and the covariance estimate between their log returns was 0.0001. You are
going to update the covariance estimate with a GARCH(1,1) model. The parameters of the
GARCH model are = 0.04, = 0.94, and w = 0.00003. The prices of the two assets at
close of trading today are $20.5 (asset A) and $40.5 (asset B), respectively. What is the new
covariance estimate?
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Elementary Differential Equations
Authors: William E Boyce, Richard C DiPrima, Douglas B Meade
11th Edition
1119169879, 9781119169871
