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Questions and Answers
Before January 1999, what was the characteristic of the historical volatility for the Brazilian Real versus the U.S. dollar?
Before January 1999, what was the characteristic of the historical volatility for the Brazilian Real versus the U.S. dollar?
- Very small (correct)
- Unpredictable
- Very high
- Increasing steadily
What event occurred on January 13th, 1999, that likely impacted the historical volatility of the Brazilian Real?
What event occurred on January 13th, 1999, that likely impacted the historical volatility of the Brazilian Real?
- Brazil introduced a new currency
- There was a global economic downturn
- Brazil abandoned the defense of the currency peg (correct)
- The U.S. dollar gained value against the Euro
Which of the following methods for calculating volatility would be most affected by a sudden change in the currency's value?
Which of the following methods for calculating volatility would be most affected by a sudden change in the currency's value?
- 60 day equal weight (correct)
- 250 day equal weight
- RiskMetrics model with the daily decay factor l = 0.94
- Simple moving average
What would be the most likely outcome of abandoning the defense of the currency peg?
What would be the most likely outcome of abandoning the defense of the currency peg?
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Using the data from the close of business on January 13th, which method would have shown the greatest jump in measured historical volatility?
Using the data from the close of business on January 13th, which method would have shown the greatest jump in measured historical volatility?
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