Who knows more about future currency volatility?

Charlie Charoenwong, Nattawut Jenwittayaroje and Buen Sin Low

Journal of Futures Markets, 2009, vol. 29, issue 3, 270-295

Abstract: We use four currency pairs from October 1, 2001 to September 29, 2006 to compare the predictive power of the implied volatility derived from currency option prices that are traded on the Philadelphia Stock Exchange (PHLX), Chicago Mercantile Exchange (CME), and over‐the‐counter market (OTC). Among the competing implied volatility forecasts, OTC‐implied volatility subsumes the information content of PHLX‐ and CME‐implied volatility. Consistent with extant studies our result also shows that the implied volatility provides more information about future volatility–regardless of whether it is from the OTC, PHLX, or CME markets–than time series based volatility. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 29:270–295, 2009

Date: 2009
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