Finance Junkie
Posts: 205
Joined: Mon Feb 04, 2013 3:35 pm


Postby » Mon Oct 14, 2013 5:48 am

Using both RiskMetrics and historical standard deviation, calculate the K-value that equates the most recent weight between the two models. Assume λ is 0.98.

A) K = 50.
B) K = 30.
C) K = 51.
D) K = 98.

(1 − λ) λt = (1 − 0.98)(0.98)0 = 0.02; 1/K = 0.02, K = 50.

Can you please explain from 1/K = 0.02 part... why 1/K

Finance Junkie
Posts: 258
Joined: Thu Sep 20, 2012 3:42 pm


Postby pradeeppdy » Tue Oct 15, 2013 7:20 am

Because historical returns are equal weighted,That's why we do 1/K.

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