Testing the Informational Efficiency of OTC Options on Emerging Market Currencies
Author/Editor: Armando Méndez Morales, Jorge A. Chan-Lau
Release Date: © January, 2003
ISBN
: 978-1-45184-165-7
Stock #: WPIEA0012003
English
Stock Status: Available
Languages and formats available
| English | French | Spanish | Arabic | Russian | Chinese | Portuguese | |
| Paperback | Yes | ||||||
| Yes |
Description
This paper analyzes the informational efficiency of OTC currency options on the Czech koruna and the Polish zloty correcting for the volatility risk premium and errors-in-variable problems, using state-of-the-art techniques (Chernov 2001). It finds that these markets are more efficient than mature markets possibly because of higher relative participation of informed dedicated investors, which offset the effects of relative illiquidity and higher transaction costs in these countries. Moreover, implied volatilities generally anticipate the direction of volatility correctly, with a bias to overpredicting volatility increases reflecting one-sided markets.
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Taxonomy
More publications in this series: Working Papers
More publications by: Armando Méndez Morales ; Jorge A. Chan-Lau
