ARCH and stochastic volatility models. We consider two major dollar exchange rates, and we show that returns standardized …

day-to-day volatility of currency prices that should be driven by slow-moving macro fundamentals …

We analyze the implied volatility smile of a lognormal distribution on a on a 6 – month EUR/USD call currency option … contract using a random standard normal variable. There is significant time variation in the implied volatility smile and the … estimates of a risk adjusted measure. Deep in or out of the money contract has higher implied volatility. We have found that the …