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I have posted the solution to the fall assignment. Thank you for all of your work. I will try to get them graded in the next week or so.

Here is the contents of the chat window from tonight.

I mentioned at the lecture yesterday that for our purposes you can ignore interest rates in the estimation of the market price of risk.

For the last question, since X1/X2 is singular when the conditioning event is {X2=0}, rather than plotting the conditional expectation of X1/X2, plot the two curves given by the conditional expectation of (X1, X2).

For the third question on the fall assignment, you can assume that all of the variances are one.

I have posted the fall assignment. It is due in two weeks on the Oct. 28 at 5:30 PM CT.

For next week's project session, we will use the same dataset as for this week's exercise, weekly S&P 500 log total returns for five years through Oct. 5, 2009.

The primary reference for the asymmetric conditional heteroskedasticity model, by Jean-Michel Zakoian, is available through the University Library by following this DOI link.

The primary reference for the asymmetric conditional heteroskedasticity model, by Jean-Michel Zakoian, is available through the University Library by following this DOI link.