
Ultimate access to all questions.
Q-85. We assume a lambda parameter of 0.850 under an exponential smoothing (i.e., EWMA) approach to the estimation of today's (t) daily volatility. Yesterday (t-1) is the most recent daily return in our series. What are the weights assigned, respectively, to yesterday's and the day before yesterday's returns; i.e., weight (t-1) and weight (t-2)?
A
15.00% (t-1) and 2.25% (t-2)
B
15.00% and 12.75%
C
72.25% and 61.41%
D
85.00% and 72.25%