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I was wondering if we could do a forecast on volatility using monte carlo on an underlying asset. For example EUR/USD :

Simulating a lot of possible paths on 1 year then calculate the volatilty for each path and doing the mean of these volatilities

thanks guys

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  • $\begingroup$ I am not clear how you would write the Monte Carlo simulation? In my experience the MC code contains one (or more) constants that determine volatility in the first place. Isn't it more straightforward to get the volatility directly from observed EURUSD data and/or a volatility model? Then why bother with MC, what does the MC simulation add to the process in that case? $\endgroup$ – noob2 May 1 '17 at 12:01
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    $\begingroup$ My underlying asset isn't the EUR/USD it's the EUR/MAD, and i want to forecast the volatility that we could observe under the new floating exchange rate regime (June 2017) $\endgroup$ – SquaredCircle May 1 '17 at 12:09

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