medium · FRM Part 2 Risk & Investment Management
An analyst is 'unsmoothing' the reported returns of a private equity fund to find its 'true' volatility.
If the reported volatility is 10% and the first-order autocorrelation (φ) of returns is 0.45, what is the estimated true volatility?
- 16.2%
- 21.0%
- 14.5%
- 10.0%
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