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You are a risk manager at a big corporation. How can you update the volatility estimate for an asset when the closing price yesterday was R 375, and the estimated daily volatility was 1.2%? Today’s closing price is R 371. You need to consider the following two methods for updating the volatility estimate: A) EWMA model with λ = 0.95 B) GARCH (1,1) model with ω = 0.00000003, α = 0.05, and β = 0.95
Sagot :
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