Forex Option Prices

[kxchan]

Hi All,

Do you have any ideas on what can be researched for the topic as follows:

The mean reversion behavior of implied volatility time series, as observed from forex option prices

Look forward to all the advice!

 

[Martinghoul]

A lot of things...

 

[kxchan]

what questions will you ask with regard to that topics?

 

[Martinghoul]

Are volatilities mean-reverting? What are the parameters of the mean-reversion process (O-U)? What forecasting methodology can be used? What could be the fundamental reasons for the mean-reversion of FX option volatilities? Etc...

 

[kxchan]

Any suggestions on the possibility to quantify the mean-reversion behaviour? there are quite a few ways to do this but any idea which method can present the topics well?

 

[Martinghoul]

Any suggestions on the possibility to quantify the mean-reversion behaviour? there are quite a few ways to do this but any idea which method can present the topics well?

Fit the Ornstein-Uhlenbeck process to it. There's a variety of other methods.

 

[edwarddevis]

There are so many options available for traders to decide forex options price, you can go with the concept of fixing price of the different options that will be good in terms of methodology followed by you.

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