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Price of an asset at close of trading yesterday

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Suppose that the price of an asset at close of trading yesterday was $100 and the simple-return volatility estimate for yesterday was 3.7% per day. The price at the close of trading today is $106.

(i) Update tomorrow's volatility estimate using simple returns and

(a) The EWMA model with λ = 0.80

(b) The GARCH(1,1) model with VL = 0.0009 (=0.032 ), α = 0.15, and β = 0.80.

(ii) What would change in (a) of part (i) if the stock price at the close of trading today were $103.7 instead of $106?

Reference no: EM133119456

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