You are a Credit Risk Analyst at Fidelity Associates. Your manager asked you to evaluate the...

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You are a Credit Risk Analyst at Fidelity Associates. Your manager asked you to evaluate the conditional variance of a zero bond under the following assumptions regarding a GARCH(1,1) and other information: Parameter estimates: w = 0.0001; a = 0.01; B = 0.97. • Pricing data and assumptions: The zero-bond price at the close of trading yesterday was $800 and its volatility (Standard deviation) was estimated at 1.3% per day. The zero-bond price at the close of the trading session today is expected to be $810. Assume that the closing price will be the expected closing price will be the realized closing price. Using the above information, the conditional variance is ? You are a Credit Risk Analyst at Fidelity Associates. Your manager asked you to evaluate the conditional variance of a zero bond under the following assumptions regarding a GARCH(1,1) and other information: Parameter estimates: w = 0.0001; a = 0.01; B = 0.97. • Pricing data and assumptions: The zero-bond price at the close of trading yesterday was $800 and its volatility (Standard deviation) was estimated at 1.3% per day. The zero-bond price at the close of the trading session today is expected to be $810. Assume that the closing price will be the expected closing price will be the realized closing price. Using the above information, the conditional variance is ?

Answer rating: 100% (QA)

To calculate the conditional variance of a zero bond using the GARCH11 model we can utilize the form... View the full answer