The volatility information contained in high-frequency exchange rate quotations and in implied volatilities calculated from options prices is compared by estimating ARCH models for hourly and daily DM/$ returns. The results are based on the year of Reuters quotations supplied by Olsen amp;...

The volatility information contained in high-frequency exchange rate quotations and in implied volatilities calculated from options prices is compared by estimating ARCH models for hourly and daily DM/$ returns. The results are based on the year of Reuters quotations supplied by Olsen amp;...

Risk-neutral (RN) and real-world (RW) densities are derived from option prices and risk assumptions, and are compared with historical densities obtained from time series. Two parametric methods that adjust from RN to RW densities are developed, firstly a CRRA risk aversion transformation and...

We compare forecasts of the realized volatility of the pound, mark and yen exchange rates against the dollar, calculated from intraday rates, over horizons ranging from one day to three months. Our forecasts are obtained from a short memory ARMA model, a long memory ARFIMA model, a GARCH model...