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Calculating vols in Regulated Currency Regime
In our market central bank controls the Exchange rate. This has led to a very liquid onshore market in forward swap. The volatility in forward swap quotes is much higher than that in the spot market. In such a scenario1. Is calculating spot volatility using spot history a good proxy for forecasting implied vols?2. If not, then how do i include the impact of forward vols in spot volatilityThanks Jugal