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An Excel spreadsheet containing over 900 days of daily data on a number of difffferent exchange

rates and stock indices can be downloaded from the website: www-2.rotman.utoronto.ca/ hull/data,

Choose one exchange rate and one stock index. Estimate the value of in the EMWA model that

minimizes the value of

X(vi i i)

2

i

where vi is the variance forecast made at the end of day i i 1 and i is the variance calculated from

the data between day i and day i + 25. Use the Solver tool in Excel. To start the EMWA calculations,

set the variance forecast at the end of the fifirst day equal to the square of the return on that day.