Define and explain the concept of Expectation and conditional variance b. Could we use the GARCH model to forecast exchange rates? if yes, define and explain each of the formulas, also giving an example vs. Either the following information Spot rate $1.53/d Standard deviation of spot rate is 4.13% An appreciation of this spot rate is anticipated in 90 days, 2.13% Calculate the expectation and conditional variance What is the probability that pound (j) will appreciate in 90 days to $1.63/d d. Explain how a foreign exchange swap for an amount of $100,000 can be set up between an American firm (MSN) and a Japanese bank (Nomura), by applying the swap pointsw 23/18 knowing that the bid is 104.33Y/$ and ask is 104Y/$. Using interest rate parity theory, justify why this definition could be valid for Nomura Sent Write?

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Expectation and Conditional Variance 1 Expectation Expectation in the context of probability theory and statistics refers to the average or mean value of a random variable It represents the longterm a... View the full answer