Pilot paper Q2 – the volatility

This topic has 5 replies, 3 voices, and was last updated 14 years ago by John Moffat.

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May 11, 2012 at 8:53 am #52598
nguyenha216
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Dear Sir,

I would like to ask about how to caculate the annual volatility in Q2,b) of Pilot Paper.
The answer have the annual volatility of sterling/EUR = 0.22.
It should come from which stated in the Question: “the monthly volatility of the Euro against sterling is 6.35 per cent”. Howerver I don’t know how it results in 0.22.

Thanks for your effort,

Ha
May 23, 2012 at 2:46 am #97430
Anonymous
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6.35%*?12=0.22
May 23, 2012 at 2:46 am #97431
Anonymous
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6.35%*?12=0.22
May 23, 2012 at 7:29 am #97432
John Moffat
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serena is correct 🙂
June 10, 2012 at 9:34 am #97433
nguyenha216
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Thanks teacher and Serana.
Now I know how to caculate it. However, I don’t know how to caculate the Sterling Euro forward (indirect) 1.4426 (pls see the answer in question 2)

Thanks a lot,

Ha
June 11, 2012 at 8:41 am #97434
John Moffat
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He has used the interest rate formula (Fo=So x (1+hc)/(1+hb))) on the formula sheet.
Remember that the interest rates quoted are always yearly rates, and so for the 3-monthly interest rates you divide by 4.
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