Volatility: Exponentially weighted moving average, EWMA (FRM T2-22)

[here is my XLS https://trtl.bz/2t1pb9S] The exponentially weighted moving average (EWMA) cures the key weakness of the common historical standard deviation by assigning greater weight to more recent returns and lessor weights to more distant (in the past) returns. Its key parameter is lambda, λ, which specifies the ratio of consecutive weights. The EWMA elegantly simplifies to its recursive form: σ^2(n) = λ*σ^2(n-1) + (1-λ)*u^2(n-1). Discuss this video here in our forum: https://trtl.bz/2Hztp12

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