general shape of the implied volatility function of the corresponding currency pair. Overall, we conclude that there is a …

Bermudan cancelable features. We consider a three-factor pricing model with FX volatility skew which results in a time …

Interest rate volatility, as implied by swaptions prices, rose in all major economic areas between 2001 and early 2004 … structure has flattened. The rise and fall of US dollar implied volatility reflected changes both in expectations of realized … volatility and in the compensation for volatility risk …

We construct multi-currency models with stochastic volatility and correlated stochastic interest rates with a full … interest rate by a stochastic volatility displaced-diffusion Libor Market Model [AA02], which can model an interest rate smile …

We identify a global risk factor in the cross-section of implied volatility returns in currency markets. A zero …-cost strategy that buys forward volatility agreements with downward sloping implied volatility curves and sells those with upward … slopes - volatility carry strategy - generates significant excess returns. The covariation with volatility carry returns …

and volatility spillovers between spot and futures prices of four major international currencies traded on two trading … sample currencies. The volatility spillover results indicate the presence of short and long-run volatility spillovers between … futures and spot markets. Volatility spillovers are stronger from futures to spot in the short-run while inverse is the case …

I show that volatility risk of the dollar factor --- an equally weighted basket of developed U.S. dollar exchange rates … --- carries a significant risk premium and that it is priced in the cross-section of currency volatility excess returns. The … dollar factor volatility risk premium is negative on average with an upward sloping and concave term structure. Consistent …

predictive capability of currency volatility risk premia for currency returns. The volatility risk premium -- the difference … between expected realized volatility and model-free implied volatility -- reflects the costs of insuring against currency … volatility fluctuations, and the strategy sells high-insurance-cost currencies and buys low-insurance-cost currencies. The …

exchange rate volatility. Eventually, the model offers a solution to the exchange rate disconnection puzzle. …

aggressiveness within the first 10 tiers, but that this pattern reverses in the outer layers of the book. In a high volatility …