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 to improve your forecast.
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 a method of improving an existing forecast, not a method of forecasting exchange rate volatility. The other options (B, C, and D) are all methods of forecasting exchange rate volatility.

Which of the Following Is Not a Method of Forecasting