Calculating vols in Regulated Currency Regime
Posted: December 1st, 2004, 4:38 am
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