At the end of Thursday, the volatility of asset A is 2% per day and the volatility of asset B is 1% per day. Also, the covariance between the assets is 0.0001. During Friday, asset A produces a return of 3% and asset B produces a return of zero. An EWMA model with $\lambda = 0.9$ is used. Answer the following questions giving two decimal places.
i) What is an estimate of the volatility per day of asset A at the end of Friday? _ _ _ _ _ _ _
ii) What is an estimate of the volatility per day of asset B at the end of Friday? _ _ _ _ _ _
iii) What is an estimate of the correlation between the assets at the end of Friday? _ _ _ _ _ _ _

Question

Quizplus · Accepted Answer

The Answer is i): 2.12%
ii): 0.95%
iii) 0.45

At the End of Thursday, the Volatility of Asset a Is