Deriving Market Expectations for the Euro-Dollar Exchange Rate from Option Prices

Deriving Market Expectations for the Euro-Dollar Exchange Rate from Option Prices
Option prices provide valuable information on market expectations. This paper attempts to extract market expectations, as conveyed by an implied risk-neutral probability distribution, from option prices for the dollar-euro exchange rate. Returns' volatilities are inferred from observed and interpolated option prices. To address robustness, two... READ MORE...

Publication date: October 2004
ISBN 9781451859997
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