Forecasting behaviour of exchange rate after the annouce of switching from peg to float

  • Thread starter Thread starter Oussab
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financeguy said:
I think you're misunderstanding me. I was just recommending that you look at what happened to EURRUB and USDRUB currency volatility after Russia lifted a similarly managed currency basket. It's the closest comparable you've got, and it's recent and has a lot of available data around it. Obviously they aren't the same country and their economies are different, but the way their central banks managed their currencies is similar.
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Okey so regardless the size of their economy i can use Russia as a bench for Morocco , and for the data i have access to bloomberg i could extract the data . I was just asking for the first step to do after extracting EURRUB and USDRUB data and how many years of data i should take (time horizon of the study )
 
Should i compare the volatility that i get with the model with the realized volatily ?
 
Oussab said:
Should i compare the volatility that i get with the model with the realized volatily ?
Click to expand...

Like I said, you won't be getting a volatility out of the model, you'll have to use a subjective volatility that you estimate using some combination of current implied volatility, current realized volatility, and some additional volatility due to the free float to put into the model to output a process for spot/forward and derive options prices. How you estimate that volatility, as well as the other parameters, is an open ended question that you need to figure out how to answer, possibly using some of the starting points I've suggested.
 
Correct me if i'm wrong .
1 getting data of USDRUB / EURRUB OPTIONS and build a volatility surface
2 Compare it to the realized volatility
3 Try to reaplicate this to the moroccan case ?
 

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