The parameters in a GARCH (1,1) model are: omega =0.000002, alpha = 0.04, and beta = 0.95 . The current estimate of the volatility level is 1% per day. What is the expected volatility in 20 days?
A. 1.09%
B. 1.10%
C. 1.11%
D. 1.12%
A
The long run average variance rate is 0.000002/(1−0.04−0.95)=0.0002 . The expected variance rate in 20 days is 0.0002+(0.04+0.95)20×(0.012-0.0002) = 0.000118 . The volatility per day is the square root of this or 1.09%.
You might also like to view...
________ is a priority sequencing rule that specifies that the job that arrived at the workstation first is given the highest priority
Fill in the blanks with correct word
Of the following activities, which is MOST likely to be an interaction between the financial manager and the manufacturing manager?
A) Setting of credit policies B) Developing a system to bill customers, pay suppliers, and track inventory C) Budgeting the timing and amount of cash needed for the production schedule D) Determining that there are a sufficient number of trained workers to develop the product