Journal article
Currency option pricing and realized volatility
The Banking and Finance Review, Vol.2(1), pp.73-86
2010
Abstract
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.
Details
- Title
- Currency option pricing and realized volatility
- Authors/Creators
- M. Manzur (Author/Creator)A. Hoque (Author/Creator)G. Poitras (Author/Creator)
- Publication Details
- The Banking and Finance Review, Vol.2(1), pp.73-86
- Publisher
- School of Business Central Connecticut State University
- Identifiers
- 991005541885207891
- Murdoch Affiliation
- Do not use- Former Murdoch Business School
- Language
- English
- Resource Type
- Journal article
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