Manzur, Meher and Hoque, Ariful and Poitras, Geoffrey (2010) Currency option pricing and realized volatility. Banking and Finance Review, 2 (1). pp. 73-86. ISSN 1947-7945
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Volatility is a key parameter in currency option pricing. This paper examines alternative specifications of the volatility input to the Black-Scholes option pricing procedure. The focus is the relative performance of implied, realized, and GARCH-based models as predictors of market volatility to forecast currency options prices. Using exchange-traded, daily and intra-daily data for three major European currencies, the results indicate that the realized volatility model tends to outperform the other two specifications, both in-sample and out-of-sample. This result is intuitively appealing and expected to facilitate resolution of other problems in risk management applications.
|Item Type:||Article (Commonwealth Reporting Category C)|
|Additional Information:||Permanent restricted access to paper due to publisher's copyright restrictions.|
|Uncontrolled Keywords:||European options; implied volatility; realized volatility; exchange-traded; synchronicity|
|Fields of Research (FOR2008):||15 Commerce, Management, Tourism and Services > 1502 Banking, Finance and Investment > 150201 Finance|
|Socio-Economic Objective (SEO2008):||B Ecomonic Development > 90 Commercial Services and Tourism > 9001 Financial Services > 900101 Finance Services|
|Deposited On:||19 Oct 2010 20:27|
|Last Modified:||09 Jan 2012 14:46|
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