Which of the following is not a method of forecasting exchange rate volatility?
A) using the absolute forecast error as a percentage of the realized value
B) using the volatility of historical exchange rate movements as a forecast for the future
C) using a time series of volatility patterns in previous periods
D) deriving the exchange rate's implied standard deviation from the currency option pricing model

Question

Quizplus · Accepted Answer

Using the absolute forecast error as a percentage of the realized value is not a method of forecasting exchange rate volatility. It is a method of assessing the accuracy of a forecast. The other options listed are all methods of forecasting exchange rate volatility.

Which of the Following Is Not a Method of Forecasting