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1. Historical variance: the average of period returns squared (^2).

Simplifies because (i) we assume average return is zero and (ii) we divide sum of squared returns by n instead of (n-1)
Moving Average (variance):
5.370%
Moving Average (std dev):
23.17%
2. Exponentially weighted moving average (EWMA)
Only param is lambda (the 'smoothing' parameter; a.k.a., decay parameter)
lambda
EWMA (recursive)
EWMA (elaborate)
Volatility

90% << If lamdba is higher (lower), volatilty update RESPO
0.0463242 << Recursive EWMA.
Recursive EMWA uses n-1 r
4.632% << Elaborated EWMA. Gives same result. Note: most
21.523%

3. GARCH(1,1)
Three params: alpha (weight assigned to previous return^2), beta (weight assigned to previous variance),
and gamma (weight assigned to long-run variance; gamma x L.R. variance = omega)
L.R. variance
gamma
alpha
beta
GARCH(1,1)
Volatility

11
n
n-1
n-2
n-3
n-4
n-5
n-6
n-7
n-8
n-9
n - 10
n - 11

Spot
Price
$140
$85
$130
$90
$125
$100
$120
$110
$100
$110
$105
$100

Period
Return

Period
Return2

-42.5%
36.8%
-32.9%
22.3%
-18.2%
8.7%
9.5%
-9.5%
4.7%
4.9%

18.1%
13.5%
10.8%
5.0%
3.3%
0.8%
0.9%
0.9%
0.2%
0.2%

5.000%
10%
10%
80%
4.818%
21.951%

<< This gets MEAN reversion incorporated
<< Weight assigned to the L.R. variance (above)
<< Weight assigned to previous return^2
<< Weight assigned to previous variance

For Variance on (n)
For Variance on (n-1)
weights
weights
4.63242%
<< Current EWMA (n) estim
10.0% 1.80526%
3.14129% << "Lagged" variance that I
9.0% 1.21699%
10.0% 1.35222%
8.1% 0.87411%
9.0% 0.97123%
7.3% 0.36299%
8.1% 0.40332%
6.6% 0.21810%
7.3% 0.24233%
5.9% 0.04471%
6.6% 0.04967%
5.3% 0.04828%
5.9% 0.05364%
4.8% 0.04345%
5.3% 0.04828%
4.3% 0.00932%
4.8% 0.01035%
3.9% 0.00922%
4.3% 0.01025%
3.5% 0.00000%
3.9% 0.00000%
For Variance on (n)
(adjusted sum to 1.0)
14.6%
13.1%
11.8%
10.6%
9.6%
8.6%
7.7%
7.0%
6.3%
5.6%
5.1%

For Variance on (n-1) Note the above weights do
(adjusted sum to 1.0) Technically, see Allen has tw
14.6%
13.1%
11.8%
10.6%
9.6%
8.6%
7.7%
7.0%
6.3%
5.6%

0027 -0.034) 0.00001 0.0013 -0.0062 0.363) 0.0045 0.005 0.836) (0.00003 0.006 0.GARCH Parameters omega (w) 0.1) 1.00001 0.5% i.002) (0.0033 0.0041 0.004) 0.003) 0.00002 0.0008 -0.001 (0.0085 0.0019 -0.002) (0.418 (1.32% N(0.020 (1.369) (1.00003 0.308) (0.00002 0.254) (0.005 0.0028 -0.810 0.842) 0.00001 0.004 (0.00001 0.003) (0.0035 -0.407) 0.0049 0.0029 -0.0025 0.i.569) (0.319 (0.0041 -0.756 0.003 0.00001 0.001 (0.051) 0.d.193) (1.908) (1.0096 0.650 2.002) 0.00001 0.861 (0.002 GARCH(1.00001 0.00003 0.004) (0.002 0.001) (0.0014 -0.0023 0.00001 0.603) 1.00001 0.002 0.642 0.10 beta (b) 0.505 0.262 (0.00001 0.0016 -0.00001 0.00001 0.0029 Simul.00001 0.234) (2.108 (1.00001 0.000 (0.00002 0.00001 0.584) 1.314 (0.d.003) 0.00001 0.0086 0.0005 -0.00001 0.0042 -0.005 0.0012 0.004) 0.002) 0.003) 0.126 (0.003 (0.80 LT Volatility 0.0052 -0.000 0.00001 0.088 1. 0.0033 -0.0009 -0.00002 0.00001 0.0045 0.0033 0.0003 0.00001 0.001) (0.868 5. 0.00001 0.00001 0.001) (0.0016 0.00003 0.016 (0.0029 -0.5% .006) 0.00001 0.00002 Simul.0001 -0.00001 0.0018 0.004 (0.000 (1.1) Variance 0.00003 0.0146 -0.0031 0.003) (0.0000010 alpha (a) 0.0026 0.i. i.004 (0.577 1.937) (0.00001 0.004) (0.0% -2. 0.00002 0.093) 0.521 1.00001 0.00003 0.003) (0.147) 1.494) (0.001) 0.610 0.0042 -0.004) (0.00001 0.416) (0.0015 -0.002 0.000 (0.

0020 0.161 1.147) (0.137 (0.00001 0.00001 -0.00002 0.228) (0.004) 0.00002 0.001 (0.00001 0.00001 0.714) 1.0059 -0.00001 0.592 0.0004 0.004) (0.000) 0.00001 0.262 (1.0028 0.202) (1.128 (0.006) (0.0043 -0.709) 0.497) 0.914) (1.00001 0.00002 0.(0.00001 0.0067 0.00001 0.005) (0.00005 0.291) (1.0054 -0.002 0.095) 1.143) (0.00001 0.131 (0.001 0.0044 -0.0009 -0.001 (0.0017 0.209) (0.00001 0.00002 0.0006 0.0046 0.001 (0.0015 0.0004 0.00004 0.00002 0.00004 0.299 0.00001 0.005) 0.00002 0.001 0.757 0.0034 0.683) (1.0006 -0.003) 0.009) (0.0093 -0.236) 0.000) (0.0007 -0.006) (0.215 (1.076) 0.941) (0.002 0.00001 0.618) (5.001) (0.00001 0.393 (0.408 0.005) (0.002) 0.004 (0.168 (0.001 0.0011 -0.0005 -0.001) 0.503) (1.016) (0.0021 0.00001 0.000) 0.0007 -0.00001 0.001 0.005) (0.00001 0.00001 0.002 0.0038 -0.003 (0.0006 0.225 (2.00002 0.004 (0.0062 -0.000) 0.293) (1.0032 0.281) 0.001) 0.002) (0.0061 0.00001 0.0019 -0.0045 -0.0034 -0.00001 0.187) 0.379 0.484) 0.00001 0.007) 0.0009 -0.004 (0.879) (0.00001 0.000 (0.00001 0.00002 0.00001 0.678) (0.003) (0.0016 0.005) 0.0005 .066 (1.000) (0.0040 -0.0076 0.001 (0.000 (0.00001 0.001) (0.693) 0.00001 0.00002 0.0196 -0.0060 -0.0028 0.0029 0.0007 -0.00002 0.0062 -0.235) 0.00001 0.00001 0.496) (0.0013 -0.751 1.001 (0.373 (1.00001 0.00003 0.001) (0.001) (0.00001 0.002) (0.0013 0.082) 0.002) 0.0016 -0.992) (0.0004 -0.006 (0.0008 -0.00001 0.00001 0.00003 0.001 (0.226 (2.0010 -0.00001 0.002) 0.0025 -0.

973 (1.0034 .0041 -0.004) 0.00001 0.269) 0.116 (0.00001 0.159 (1.00001 0.396 1.00001 0.001) 0.0053 -0.388 1.00001 -0.005) (0.00001 0.613) 0.00001 0.00001 0.000) 0.0012 0.0003 0.0041 0.0063 -0.351 (0.0007 -0.002) 0.594) 0.0059 0.0006 -0.00001 0.00001 0.00001 0.001 (0.006 (0.00001 0.239) 0.479) (0.001 0.0013 0.004 (0.100) 1.0009 0.001 (0.187 (0.(1.0022 0.00001 0.005) 0.004 0.001 0.

5% 0.2.5% .0% -2.

48 $1.0040 0.46 $1.18 4.0036% 0.41 (0.0092 -0.90 4.47 4.0037 0.0111 -0.21 (1.47 $1.46 $1.1) Source: Stephen Taylor.0037% 0.35) 0.0036% 0.49 $1.46 $1.45 3.76 0.13 4.0052 0.0000 0.0036% 0.0024 0.41 4.0036% 0.0010 0.0135 0.51) 1.0069 0.0036% 0.0036% 0.93 3.0037% 0.0036% 0.0034 -0.0036% 0.000 0.19 4.47 $1.42 0.0036% 0.0061 -0.0036% 0.0037% 0.10 3.14 1.0132 0.68 3.85 3.0036% 0.0080 -0.94 Log Density 4.04 4.0078 0.49 $1.16 3.48 $1.646 0.47 $1. 205 .48 $1.47 $1.0005 -0.18 4.10 3.0036% 0.46 $1.08 3.0079 -0.83) 1.26 (0.20 3.55 0.0024 -0.0037% 0.0036% 0.19) (0.90 (0.40) 1. Asset Price Dynamics p.25) 0.29) 110.48 $1.50) (2.48 $1.0037% 0.0051 -0.0032 -0.93 1.46 Period Return Standardized Variance z(t) 0.47 $1.0036% 0.0037% 0.44 $1.47 $1.006 mu Omega Alpha Beta 0.79 4.95) (0.0063 0.56 S  uilni Si1 .45 $1.48 $1.75 3.0069 0.32) (2.07 1.44 $1.46 $1.45 (1.47 $1.0007 -0.09 3.74 (0.0044 0.75 4.19 4.0015 0.46 $1.Max Likelihood Estimation (MLE) for GARCH(1.0001 0.44 4.35) 0.0006 0.0036% 0.001 0.363 Log likelihood value: Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7 Day 8 Day 9 Day 10 Day 11 Day 12 Day 13 Day 14 Day 15 Day 16 Day 17 Day 18 Day 19 Day 20 Day 21 Day 22 Day 23 Day 24 Day 25 Day 26 Day 27 Day 28 Day 29 Day 30 Dollar/ Euro $1.210 Avg Return Std Dev (Returns) 0.0036% 0.0013 -0.72) 0.07 2.19 4.48 $1.06 0.47 $1.0036% 0.822 0.00 (0.47 $1.48 $1.8221 mu * 1000 alpha persistence variance*10000 0.0032 0.42 (0.04 1.0022 -0.13) 0.0036% 0.0036% 0.0033 0.44 0.0036% 0.65 3.47 $1.0001 0.0037% 0.0036% 0.20 (0.0037% 0.

46 0.0036% (0.Day 31 $1.01) 4.0006 0.19 S  uilni Si1 m 21 nui m i 1  n21(1)u .

S  uilni Si1 .

S  uilni Si1 m 21 nui m i 1  n21(1)u .