A Note on the Term Structure of Implied Volatilities for the Yen/U.S. Dollar Currency Option |
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| Authors: | Nobuya Takezawa Noriyoshi Shiraishi |
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| Institution: | (1) Graduate School of International Management, International University of Japan, Yamato-machi,Niigata Japan, 949-72;(2) School of Social Relations, Rikkyo University, Toshima-ku, Tokyo Japan, 171–8501 |
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| Abstract: | This paper tests the relationship between short dated and long dated implied volatilities obtained from Tokyo market currency
option prices by employing three different volatility models: a mean reverting model, a GARCH model, and an EGARCH model.
We document evidence that long dated average expected volatility is higher than that predicted by the term structure relationship
during the dramatic appreciation of yen/dollar exchange in the early 1990's.
This revised version was published online in August 2006 with corrections to the Cover Date. |
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| Keywords: | currency option implied volatility term structure |
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