Modeling volatility in foreign currency option pricing

Article


Hoque, Ariful, Chan, Felix and Manzur, Meher. 2009. "Modeling volatility in foreign currency option pricing." Multinational Finance Journal. 13 (1/2), pp. 181-200.
Article Title

Modeling volatility in foreign currency option pricing

ERA Journal ID19586
Article CategoryArticle
AuthorsHoque, Ariful (Author), Chan, Felix (Author) and Manzur, Meher (Author)
Journal TitleMultinational Finance Journal
Journal Citation13 (1/2), pp. 181-200
Number of Pages20
Year2009
Place of PublicationAudubon, NJ, United States
ISSN1096-1879
Abstract

[Abstract]: This paper presents a general optimization framework to forecast put and call option prices by exploiting the volatility of the options prices. The approach is flexible in that different objective functions for predicting the underlying volatility can be modified and adapted in the proposed framework. The framework is implemented empirically for four major currencies, including Euro. The forecast performance of this framework is compared with those of the Multiplicative Error Model (MEM) of implied volatility and the GARCH(1,1).
The results indicate that the proposed framework is capable of producing reasonable accurate forecasts for put and call prices.(JEL: G12, G13)

Keywordsforeign currency options, implied volatility, optimal volatility,multiplicative error model, GARCH model
ANZSRC Field of Research 2020350202. Finance
Public Notes

Files associated with this item cannot be displayed due to copyright restrictions.

Byline AffiliationsCurtin University of Technology
Permalink -

https://research.usq.edu.au/item/9z46z/modeling-volatility-in-foreign-currency-option-pricing

  • 1917
    total views
  • 12
    total downloads
  • 2
    views this month
  • 0
    downloads this month

Export as

Related outputs

Does CIA occur during financial turbulence?
Hoque, Ariful, Hassan, Kamrul and Krishnamurti, Chandrasekhar. 2015. "Does CIA occur during financial turbulence?" Academy of Taiwan Business Management Review. 11 (1), pp. 18-20.
A proposed solution for the chicken-egg dilemma in pricing currency options
Hoque, Ariful and Krishnamurti, Chandrasekhar. 2013. "A proposed solution for the chicken-egg dilemma in pricing currency options." Australasian Accounting Business and Finance Journal. 7 (2), pp. 71-86. https://doi.org/10.14453/aabfj.v7i2.6
Determinants of the strength of accounting and reporting standards: A cross-country study
Boolaky, Pran Kishansing, Krishnamurti, Chandrasekhar and Hoque, Ariful. 2013. "Determinants of the strength of accounting and reporting standards: A cross-country study." Australasian Accounting Business and Finance Journal. 7 (4), pp. 17-36. https://doi.org/10.14453/aabfj.v7i4.3
Modeling moneyness volatility in measuring exchange rate volatility
Hoque, Ariful and Krishnamurti, Chandrasekhar. 2012. "Modeling moneyness volatility in measuring exchange rate volatility ." International Journal of Managerial Finance. 8 (4), pp. 365-380. https://doi.org/10.1108/17439131211261279
Development and calibration of bio-kinetic model for surfactant biodegradation with combined respirometric and titrimetric measurements
Aravinthan, V. and Hoque, M. A.. 2011. "Development and calibration of bio-kinetic model for surfactant biodegradation with combined respirometric and titrimetric measurements." Bioresource Technology. 102 (9), pp. 5504-5513. https://doi.org/10.1016/j.biortech.2010.08.101
Combined titrimetric respirometer as a real-time sensor to monitor the aerobic biodegradation process of different substrates
Hoque, M. A., Aravinthan, V., Pradhan, N. M. and Sakhiya, A.. 2011. "Combined titrimetric respirometer as a real-time sensor to monitor the aerobic biodegradation process of different substrates." Journal of Applied Sciences. 11 (13), pp. 2299-2305. https://doi.org/10.3923/jas.2011.2299.2305
Development and calibration of bio-kinetic models for organic carbon and nitrogen biodegradation in an aerobic activated sludge system
Hoque, Muhammad A.. 2010. Development and calibration of bio-kinetic models for organic carbon and nitrogen biodegradation in an aerobic activated sludge system. PhD Thesis Doctor of Philosophy. University of Southern Queensland.
Efficiency of European emissions markets: lessons and implications
Krishnamurti, Chandrasekhar and Hoque, Ariful. 2011. "Efficiency of European emissions markets: lessons and implications." Energy Policy. 39 (10), pp. 6575-6582. https://doi.org/10.1016/j.enpol.2011.07.062
Modeling moneyness volatility in measuring exchange rate volatility
Hoque, Ariful and Krishnamurti, Chandrasekhar. 2011. "Modeling moneyness volatility in measuring exchange rate volatility." CIFEr 2011: IEEE Symposium on Computational Intelligence for Financial Engineering and Economics . Paris, France 11 - 15 Apr 2011 Piscataway, NJ. United States. https://doi.org/10.1109/CIFER.2011.5953555
Corporate capital structure and firm performance: evidence from Bangladesh
Rashid, Afzalur and Hoque, Ariful. 2011. "Corporate capital structure and firm performance: evidence from Bangladesh." Academy of Taiwan Business Management Review. 7 (2), pp. 59-72.
Modeling urea biodegradation in activated sludge using combined respirometric-titrimetric measurements
Hoque, Muhammad Azizul and Aravinthan, Vasantha. 2011. "Modeling urea biodegradation in activated sludge using combined respirometric-titrimetric measurements." Desalination and Water Treatment. 32 (1-3), pp. 115-125. https://doi.org/10.5004/dwt.2011.2686
Influence of transaction costs on foreign exchange option contracts: intra-daily tests
Hoque, Ariful, Manzur, Meher and Poitras, Geoffrey. 2010. "Influence of transaction costs on foreign exchange option contracts: intra-daily tests." International Journal of Banking and Finance. 7 (2), pp. 1-18.
Is implied volatility sensitive to the choice of currency options maturity period?
Hoque, Ariful. 2010. "Is implied volatility sensitive to the choice of currency options maturity period?" Academy of Taiwan Business Management Review. 6 (3), pp. 102-109.
Transaction cost discovery by decomposition of the error term: a bootstrapping approach
Hoque, Ariful. 2011. "Transaction cost discovery by decomposition of the error term: a bootstrapping approach." The International Journal of Business and Finance Research. 5 (1), pp. 113-121.
Essays in foreign currency options markets
Hoque, Ariful. 2010. Essays in foreign currency options markets. Saarbrücken, Germany. VDM Verlag Dr. Muller.
Put-call parity, transactions costs and PHLX currency options: intra-daily tests
Hoque, Ariful, Manzur, Meher and Poitras, Geoffrey. 2010. "Put-call parity, transactions costs and PHLX currency options: intra-daily tests." MFA 2010: 59th Midwest Finance Association Annual Conference. Las Vegas, United States 24 - 27 Feb 2010 Kearney, NE. USA.
Put-call parity econometric model for currency options market efficiency tests
Hoque, Ariful. 2010. "Put-call parity econometric model for currency options market efficiency tests." Academy of Taiwan Business Management Review. 6 (2), pp. 84-91.
Cause-and-effect between implied volatility and options price
Hoque, Ariful. 2010. "Cause-and-effect between implied volatility and options price." Academy of Taiwan Business Management Review. 6 (3), pp. 111-117.
Econometric modeling for transaction cost-adjusted put-call parity: evidence from the currency options market
Hoque, Ariful. 2010. "Econometric modeling for transaction cost-adjusted put-call parity: evidence from the currency options market." International Research Journal of Finance and Economics.
Currency option pricing and realized volatility
Manzur, Meher, Hoque, Ariful and Poitras, Geoffrey. 2010. "Currency option pricing and realized volatility." Banking and Finance Review. 2 (1), pp. 73-86.
World currency options market efficiency
Hoque, Ariful. 2010. "World currency options market efficiency." Banks and Bank Systems. 5 (2), pp. 173-178.
Calibration of biokinetic model for acetate biodegradation using combined respirometric and titrimetric measurements
Hoque, M. A., Aravinthan, V. and Pradhan, N. M.. 2010. "Calibration of biokinetic model for acetate biodegradation using combined respirometric and titrimetric measurements." Bioresource Technology. 101 (5), pp. 1426-1434. https://doi.org/10.1016/j.biortech.2009.07.012
Can we decode the messages of activated sludge through the respirograms?
Hoque, Muhammad A., Aravinthan, Vasantha and Pradhan, Nishant M.. 2009. "Can we decode the messages of activated sludge through the respirograms?" Water, Air and Soil Pollution: an international journal of environmental pollution. 9 (5/6), pp. 449-459. https://doi.org/10.1007/s11267-009-9238-6
Efficiency of the foreign currency options market
Hoque, Ariful, Chan, Felix and Manzur, Meher. 2008. "Efficiency of the foreign currency options market." Global Finance Journal. 19 (2), pp. 157-170. https://doi.org/10.1016/j.gfj.2008.02.002
Assessment on activated sludge models for acetate biodegradation under aerobic conditions
Hoque, M. A., Aravinthan, V. and Pradhan, N. M.. 2009. "Assessment on activated sludge models for acetate biodegradation under aerobic conditions." Water Science and Technology. 60 (4), pp. 983-994. https://doi.org/10.2166/wst.2009.446
Evaluation of simultaneous storage and growth model to explain aerobic biodegradation of acetate
Hoque, M. A., Aravinthan, V. and Pradhan, N. M.. 2008. "Evaluation of simultaneous storage and growth model to explain aerobic biodegradation of acetate." ISBT 2008: 1st International Society of BioTechnology Conference. Gangtok, India 28 - 30 Dec 2008 Indore, India.
Respirometric and titrimetric techniques for monitoring aerobic biodegradation of surfactant
Hoque, M. A., Aravinthan, V. and Porter, M.. 2008. "Respirometric and titrimetric techniques for monitoring aerobic biodegradation of surfactant." ISBT 2008: 1st International Society of BioTechnology Conference. Gangtok, India 28 - 30 Dec 2008 Indore, India.