Which of the Following Is Not a Method of Forecasting

question 6

Multiple Choice

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.
• 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.

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Definitions:

Face Value

The nominal or original value stated on a financial instrument, such as a bond or stock certificate.

Firm's Assets

The economic resources or valuable items owned by a company that are expected to provide future benefits.

Call Option

A financial contract that gives the buyer the right, but not the obligation, to buy a stock, bond, commodity, or other asset at a specific price within a specific time period.

Strike Price

The agreed-upon rate at which the possessor of an option may acquire (if it's a call option) or dispose of (if it's a put option) the underlying financial instrument or commodity.