25 May, 2012
Given the variation between two currencies at any given instant, how to calculate the resulting rates of appreciation and depreciation? Are the two rates same or different for a single instance of fluctuation?
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Estimating Currency Exchange Fluctuations - Appreciation and Depreciation of Two Currencies [closed]
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closed as not a real question by Bob Jansen, Tal Fishman May 25 '12 at 15:05
It's difficult to tell what is being asked here. This question is ambiguous, vague, incomplete, overly broad, or rhetorical and cannot be reasonably answered in its current form. For help clarifying this question so that it can be reopened, see the FAQ.
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The two are completely uncorrelated, variance vs returns. That is the precise reason why Volatility is an own asset class and there are traders who trade nothing but implied vols. You can't predict moves in the underlying by observation of the underlying volatility dynamics. At least I have never seen a professional volatility trader doing it. What are you trying to trade, returns or volatility? If volatility you want to start at building models that estimate and predict spreads between realized vols and implied vols. You can then advance by building volatility models (Garch,....) and volatility cones. But they all assist in taking views on return variations and now direction. Hope this helps. |
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