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


Postby anbu.edu » Sun Oct 06, 2013 11:29 pm

The current estimate of daily volatility is 1.5 percent. The closing price of an asset yesterday was $30.00. The closing price of the asset today is $30.50. Using the EWMA model with lembda = 0.94, the updated estimate of volatility is
Choose one answer.
a. 1.5096 Correct
b. 1.5085 Incorrect
c. 1.5092 Incorrect
d. 1.5083 Incorrect

How to find this answer.. i followed discreet and i cant get this answer

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


Postby pradeeppdy » Thu Oct 10, 2013 6:53 am

To calculate the return, we have y'day price and todays price,

Convert the above return from continuous compounding to discrete compounding as below,


Now you can put the values of return and volatility in EWMA model, u will get the ans.

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