Question 3Suppose that the true (unobserved) log price p of an asset follows the model:Pt = Pt-1 + at, where {at} is sequence of iid N(0, 1) random variables. Suppose that theobserved log price p, follows the model: p = Pt+et, where {e} is another sequence ofiid N(0, 0.25) random variables and {e} and {a} are independent. Let r=pr-pr-1 be theobserved log return. Calculate the lag-1 and lag-2 autocorrelations of r₁.

Given that the true (unobserved) log price of an asset follows the model:, where is sequence of iid…

Answered: Suppose that the true (unobserved) log…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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2) The time between successive customers coming to the market is assumed to have Exponential distribution with parameter l. a) If X1, X2, . . . , Xn are the times, in minutes, between successive customers selected randomly, estimate the parameter of the distribution. b) b) The randomly selected 12 times between successive customers are found as 1.8, 1.2, 0.8, 1.4, 1.2, 0.9, 0.6, 1.2, 1.2, 0.8, 1.5, and 0.6 mins. Estimate the mean time between successive customers, and write down the distribution function. c) In order to estimate the distribution parameter with 0.3 error and 4% risk, find the minimum sample size.
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