Q. Which of the following is not a method of forecasting exchange rate volatility? (Solved)
1. using the absolute forecast error as a percentage of the realized value.
2. using the volatility of historical exchange rate movements as a forecast for the future.
3. using a time series of volatility patterns in previous periods.
4. deriving the exchange rate's implied standard deviation from the currency option pricing model.
- a. using the absolute forecast error as a percentage of the realized value.