The Forecasting Performance of the Implied Standard Deviation in Currency Options
Hung‐Gay Fung
(Department of Economics Finance, University of Baltimore, Baltimore, MD 21201)
Chin‐Jen Lie
(University of Rhode Island, College of Business Administration, Department of Finance and Insurance, Kingston, RI)
Abel Moreno
(North Dakota State University, Department of Industrial Engineering, Fargo, ND 58105.)
245
Abstract
This study evaluates the forecasting performance of different predictive measures for the future exchange rate variability. Results seem to indicate that the out‐of‐the‐money ISD outperforms the at‐the‐money ISD and other predictive measures. Thus, when ISD is used to forecast future exchange rate variability, out‐of‐the‐money options should be selected instead of using all other options to compute the complicated weighting schemes.
Citation
Fung, H., Lie, C. and Moreno, A. (1990), "The Forecasting Performance of the Implied Standard Deviation in Currency Options", Managerial Finance, Vol. 16 No. 3, pp. 24-29. https://doi.org/10.1108/eb013646
Publisher
:MCB UP Ltd
Copyright © 1990, MCB UP Limited