Mhux disponibbli bil-Malti
Peter Christoffersen
- 3 June 2004
- WORKING PAPER SERIES - No. 366Details
- Abstract
- Financial decision makers often consider the information in currency option valuations when making assessments about future exchange rates. The purpose of this paper is to systematically assess the quality of option based volatility, interval and density forecasts. We use a unique dataset consisting of over 10 years of daily data on over-the-counter currency option prices. We find that the OTC implied volatilities explain a much larger share of the variation in realized volatility than previously found using market-traded options. Finally, we find that wide-range interval and density forecasts are often misspecified whereas narrow-range interval forecasts are well specified.
- JEL Code
- G13 : Financial Economics→General Financial Markets→Contingent Pricing, Futures Pricing
G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading
C22 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models &bull Diffusion Processes
C53 : Mathematical and Quantitative Methods→Econometric Modeling→Forecasting and Prediction Methods, Simulation Methods