high default probability, while it is mitigated for politically active firms. The demand pressure for the options of …

This paper uses a measure of the relative price of out-of-the-money (OTM) European put and call currency options to … forecast daily movements in the dollar/euro exchange rate over the period of January 2002 to June 2004. Since these OTM options …'s estimate of the relative probabilities of appreciation or depreciation of the euro over the life of the options. Forecasts that …