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Q.2831 Find the weight of an observation 13 days ago if the total number of days in the historical window is 300 with a 0.8 control rate of memory decay. | Financial Risk Manager Part 2 Quiz - LeetQuiz

Explanation:

The correct answer is D.

The weight of observation i-days ago is given by:

w(i) = \frac{\lambda^{i-1}(1 - \lambda)}{1 - \lambda^n}

Where n is the number of days in the historical window and $\lambda$ (or $\theta$ ) is the control rate of the memory decay,

Therefore:

W(13) = \frac{0.8^{13-1}(1 - 0.8)}{1 - 0.8^{300}} \approx 0.01374

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