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212. An analyst has interest in two assets, A and B. At the close of business yesterday, these assets had daily volatilities of 1.3% and
212. An analyst has interest in two assets, A and B. At the close of business yesterday, these assets had daily volatilities of 1.3% and 2.0% respectively. In addition, the assets were priced at $40 for A and $80 for B as at the close of business yesterday, and the estimated correlation coefficient between the two assets stood at 0.25. The EWMA model used by the analyst had 1 = 0.95. Compute the current estimate of the covariance between A and B. A. 6.5E-05 B. 0.0006 C. 2.6E-05 D. 0.05
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