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**Question 73** An asset manager needs to calculate an exponentially weighted moving average (EWMA). The decay factor for daily data is estimated to be 0.91, and daily volatility is estimated to be 1.5%. The return on the stock market was 2%. What is the new estimate of volatility using the EWMA model? | Financial Risk Manager Part 1 Quiz - LeetQuiz

Explanation:

\sigma_n^2 = 0.91 \times 0.015^2 + (1 - 0.91) \times 0.02^2 = 0.00024075

\sigma_n = \sqrt{0.00024075} = 0.01552 = 1.552\%

(Book 4, Module 49.3, LO 49.e)

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Question 73

An asset manager needs to calculate an exponentially weighted moving average (EWMA). The decay factor for daily data is estimated to be 0.91, and daily volatility is estimated to be 1.5%. The return on the stock market was 2%. What is the new estimate of volatility using the EWMA model?

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Financial Risk Manager Part 1

Get started today

Comments (0)

Get started today

Question 73 An asset manager needs to calculate an exponentially weighted moving average (EWMA). The decay factor for daily data is estimated to be 0.91, and daily volatility is estimated to be 1.5%. The return on the stock market was 2%. What is the new estimate of volatility using the EWMA model?

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