The paper studies the effect of the market's perceived exchange rate volatility on bid-ask spreads. The anticipated … volatility is extracted from currency options data. An increase in the perceived volatility is found to widen bid-ask spreads … estimate of the effect of the volatility on the spreads. Although the spread-volatility relation implied by the option model of …

An efficient method is developed for pricing American options on combination stochastic volatility …/jump-diffusion processes when jump risk and volatility risk are systematic and nondiversifiable, thereby nesting two major option pricing … models. The parameters implicit in PHLX-traded Deutschemark options of the stochastic volatility/jump- diffusion model and …

Market participants' forecasts of future exchange rate volatility can be recovered from option contracts on foreign … currencies. Such implicit volatility forecasts for four currencies are used to test rational expectations jointly with the … version of market rationality: the market can correctly forecast the direction of the change in exchange rate volatility. This …

components have return impacts also have impacts on deals and volatility. The announcement itself, in addition to the magnitude … of surprise, is found to increase the deals and price volatility in the immediately after the announcement. In addition …, some other items have no return impacts but deals and volatility impacts. These facts are consistent with a view that …

A rapidly growing literature has documented important improvements in financial return volatility measurement and … return volatility. In an application to the DM/$ exchange rate, the S&P500 market index, and the 30-year U.S. Treasury bond … non-jump movements in a simple but sophisticated volatility forecasting model, we find that almost all of the …

volatility on international trade. A common explanation is the availability of hedging instruments. This paper examines the … empirical validity of this explanation using data on over 1,000 country pairs. Which countries have currency hedging instruments …. There are two main findings. First, there is no evidence in the data to support the validity of the hedging hypothesis …

, but not at long horizons. At horizons of several years, complete hedging not only does not lower return variance, it … apparent causes, and investigates their implications for hedging practice …