Question

Suppose that the price of Asset X at close of trading yesterday was $300 and its volatility was estimated as 1.3% per day. The price of X at the close of trading today is $298. Suppose further that the price of Asset Y at the close of trading yesterday was $8, its volatility was estimated as 1.5% per day, and its correlation with X was estimated as 0.8. The price of Y at the close
of trading today is unchanged at $8. 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  = 0.000002, = 0.04, and = 0.94.
In practice, is the  parameter likely to be the same for X and Y?


$1.99
Sales1
Views43
Comments0
  • CreatedJuly 30, 2015
  • Files Included
Post your question
5000