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  3. Intro to Computational Finance with R

Exercise

Plot the data from the simulated MA(1) model

Still consider the MA(1) model $$ Y_t == 0.05 + \epsilon_t + \theta \epsilon_{t-1}, $$ with \(|\theta| < 0\) and \(\epsilon_t ~ iid\) \(N(0,(0.1)^2)\).

The code on the right simulates 250 observations and should look familiar.

Instructions

100 XP
  • Make a line plot of the observations in ma1_sim with the title "MA(1) Process: mu = 0.05, theta = 0.5". Label the x-axis with "time" and the y-axis with "y(t)". A line plot can be specified by setting type = "l" of the plot() function.
  • Add a horizontal line at zero.