This paper evaluates the forecasting accuracy of correlation derived from implied volatilities in dollar-mark, dollar-yen, and mark-yen options from January 1989 to May 1995. As a forecast of realized correlation between the dollar-mark and dollar-yen, implied correlation is compared against...

The paper presents examples of application of error correction models (ECM) in forecasting daily changes of market volatility recorded on currency options markets in Poland, Hungary and South Africa. The models are based on the observed correlation between daily changes of spot rates and daily...