Calculate the current estimate of the covariance

Assignment Help Basic Computer Science

Reference no: EM131406462

Suppose that the current daily volatilities of asset A and asset B are 1.6% and 2.5%, respectively. The prices of the assets at close of trading yesterday were $20 and $40, and the estimate of the coefficient of correlation between the returns on the two assets made at that time was 0.25. The parameter λ used in the EWMA model is 0.95.

(a) Calculate the current estimate of the covariance between the assets.

(b) On the assumption that the prices of the assets at close of trading today are $20.5 and $40.5, update the correlation estimate.

Reference no: EM131406462

Questions Cloud

Create a console program that prompts the user : Create a console program that prompts the user to enter the name and address of their employer and position they hold or the name and address of their favorite restaurant and their favorite meal.Display this information on the screen, each on a se..

Feature vectors by the same scalar : Does multiplying each of the feature vectors by the same scalar affect the output of the classification when using the perceptron algorithm?

Describe efficiency and effectiveness of the provided layout : QSO 600- Describe the efficiency and effectiveness of the provided layout. Describe customer or client convenience issues related to layout. Address safety, environmental, and ergonomics issues related to the layout of selected company.

Audience and its needs before preparing a presentation : Why is it important to understand your audience and its needs before preparing a presentation? How would a presentation differ if the audience was mostly teenagers as opposed to a presentation to an audience that is mostly adults.

Calculate the current estimate of the covariance : On the assumption that the prices of the assets at close of trading today are $20.5 and $40.5, update the correlation estimate.

What is the maximum number of subnets : (1) One of the nodes in a broadcast domain is assigned the IPv4 address 152.165.113.126/21. Which one of the following IPv4 addresses cannot be assigned to any of the other nodes in the same broadcast domain? (152.165.115.254/21) (192.168.118.1..

How did you feel about the decision and the escalation : Discuss a time when you were involved, either as an individual or as part of a group, in a decision in which escalation of commitment took place. How did you feel about the decision and the escalation?

What amount of deferred tax liability should be reported : Coronado Corporation began operations in 2017 and reported pretax financial income of $213,000 for the year. Coronado's tax depreciation exceeded its book depreciation by $43,000. Coronado's tax rate for 2017 and years thereafter is 30%. In its De..

Single precision-double precision floating point numbers : What are the differences between using single precision vs. double precision floating point numbers in how numbers (size, accuracy, etc.) can be represented?

User Account

All Pages