title={Modeling Volatility in Foreign Currency Option Pricing},
author={Ariful Hoque and Felix Chan and Meher Manzur},
journal={Multinational Finance Journal},
publisher={Multinational Finance Society; Global Business Publications},
keywords={Foreign currency options; implied volatility; optimal volatility; multiplicative error model; GARCH model},
abstract={This paper presents a general optimization framework to forecast put and call option prices by exploiting the volatility of the options prices. The approach is flexible in that different objective functions for predicting the underlying volatility can be modified and adapted in the proposed framework. The framework is implemented empirically for four major currencies, including Euro. The forecast performance of this framework is compared with those of the Multiplicative Error Model (MEM) of implied volatility and the GARCH(1,1). The results indicate that the proposed framework is capable of producing reasonable accurate forecasts for put and call prices..},