Hull:Options,Futures,andOtherDerivatives,NinthEditionChapter23:EstimatingVolatilitiesandCorrelationsMultipleChoiceTestBank:Questions1.HowmanyparametersarenecessarytodefineanEWMAmodelA.1B.2C.3D.42.HowmanyparametersarenecessarytodefineaGARCH(1,1)modelA.1B.2C.3D.43.AttheendofThursday,theestimatedvolatilityofassetAis2%perday.DuringFridayassetAproducesareturnof3%.AnEWMAmodelwithlambdaequalto0.9isused.WhatisanestimateofthevolatilityofassetAattheendofFriday?A.2.08%B.2.10%C.2.12%D.2.14%4.AttheendofThursday,theestimatedvolatilityofassetBis1%perday.DuringFridayassetBproducesareturnofzero.AnEWMAmodelwithlambdaequalto0.9isused.WhatisanestimateofthevolatilityofassetAattheendofFriday?A.0.98%B.0.95%C.0.92%D.0.90%5.AttheendofThursday,theestimatedcovariancebetweenassetsAandBis0.0001.DuringFridayassetAproducesareturnof3%andassetBproducesareturnofzero.AnEWMAmodelwithlambdaequalto0.9isused.WhatisanestimateofthecovarianceattheendofFriday?A.0.000090B.0.000081C.0.000100D.0.0000956.WhichofthefollowingisadefinitionofthecovariancebetweenXandY?A.CorrelationbetweenXandYtimesvarianceofXtimesvarianceofYB.VarianceofXtimesthevarianceofYC.CorrelationbetweenXandYdividedbytheproductofthestandarddeviationofXandthestandarddeviationofYD.CorrelationbetweenXandYtimesstandarddeviationofXtimesstandarddeviationofY7.WhatdoesEWMAstandfor?A.EquallyweightedmovingaverageB.EquallyweightedmedianapproximationC.ExponentiallyweightedmovingaverageD.Exponentiallyweightedmedianaverage8.Whichofthefollowingistruewhentheparameterlambdaequals0.95?A.Theweightgiventothemostrecentobservationis0.95B.Theweightgiventotheobservationonedayagois95%oftheweightgiventotheobservationtwodaysagoC.Theweightsgiventoobservationsaddupto0.95D.Theweightsgiventotheobservationtwodaysagois95%oftheweightgiventotheobservationonedayago9.WhichofthefollowingistrueofmaximumlikelihoodmethodsA.TheycalculatethemaximumpossiblevaluesforparametersB.TheycalculateparametersthatgivethehighestprobabilityofpastdataoccurringC.Theycalculatevaluesforkeyvariablestha...
