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Current estimate of the volatility

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Suppose the long run variance rate in a GARCH(1,1) model is 0.0002 so that the long-run volatility per day is 1.4%.

σ2n=0.00092+0.13u2t-1+0.86σ2n-1

Suppose that the current estimate of the volatility is 1.6% per day and the most recent percentage change in the market variable is 1%.What is the new variance estimate?

Reference no: EM131054219

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