(Answered) Suppose the long run variance rate in a garch11 model is

Finance

Suppose the long run variance rate in a GARCH(1,1) model is 0.0002 so that the long-run volatility per day is 1.4%.

σ²_n=0.00092+0.13u²_t-1+0.86σ²_n-1

Suppose that the current estimate of the volatility is 1.6% per day and the most recent percentage change in the market variable is 1%.What is the new variance estimate?

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