An Excel spreadsheet containing daily data on a number of different exchange rates and stock indices can be downloaded from the author’s Web site:

http://www.rotman.utoronto.ca/hull/data

Choose one exchange rate and one stock index. Estimate the value of λ in the EWMA model that minimizes the value of

where v_i is the variance forecast made at the end of day i – 1 and β_i is the variance calculated from data between day i  and i + 25.. Use Excel’s Solver tool. Set the variance forecast at the end of the first day equal to the square of the return on that day to start the EWMA calculations.