Autore
Tamborski, Mariusz

Titolo
Are standard deviations implied in currency option prices good predictors of future exchange rate volatility?
Periodico
European University Institute of Badia Fiesolana (Fi). Department of Economics - Working papers
Anno: 1994 - Fascicolo: 10 - Pagina iniziale: 1 - Pagina finale: 23

In this paper, we use the currency option pricing model with stochastic interest rates and transactions costs developed by Tamborski (1994) to investigate the strong rationality of the market in its ex ante prediction of the one-month-ahead exchange rate volatility for six currencies using the data from PHLX. We find that in OLS estimations, the strong rationality is rejected only for the German mark and the Swiss franc. For four other currencies: the Australian dollar, the British pound, the Canadian dollar and the Japanese yen we find that the standard deviation implied in currency options prices is valuable predictor of future currency return variance.



Testo completo: http://hdl.handle.net/1814/490

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