{ "title": "Testing the Informational Efficiency of OTC Optionson Emerging Market Currencies", "publication": "IMF Working Papers, January 1, 2003", "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/30/testing-the-informational-efficiency-of-otc-optionson-emerging-market-currencies-16214", "canonical": "https://www.imf.org/en/publications/wp/issues/2016/12/30/testing-the-informational-efficiency-of-otc-optionson-emerging-market-currencies-16214", "overlayPath": "/en/publications/wp/issues/2016/12/30/testing-the-informational-efficiency-of-otc-optionson-emerging-market-currencies-16214/index.md", "summary": "This paper analyzes the informational efficiency of OTC currency options on the Czech koruna and the Polish zloty correcting for the volatility risk premium and errors-in-variable problems, using state-of-the-art techniques (Chernov 2001).", "sections": [ { "heading": "Summary and key findings", "content": "- The paper analyzes the informational efficiency of OTC currency options on the Czech koruna and the Polish zloty correcting for the volatility risk premium and errors-in-variable problems, using state-of-the-art techniques (Chernov 2001).\n- It finds that these markets are more efficient than mature markets.\n- Possible explanation: higher relative participation of informed dedicated investors, which offset the effects of relative illiquidity and higher transaction costs in these countries.\n- Implied volatilities generally anticipate the direction of volatility correctly, with a bias to overpredicting volatility increases reflecting one-sided markets." }, { "heading": "Methodology", "content": "- Corrections applied for the volatility risk premium and errors-in-variable problems.\n- Techniques referenced: Chernov 2001 (described as state-of-the-art in the paper)." }, { "heading": "Implications and interpretive points", "content": "- Higher measured informational efficiency in these emerging market OTC options may reflect market structure characteristics (greater share of informed dedicated investors) rather than lower transaction costs or greater liquidity.\n- The observed bias of implied volatilities to overpredict volatility increases is consistent with one-sided market conditions." }, { "heading": "Publication and metadata (as provided)", "content": "- Authors: Jorge A Chan-Lau, Armando Méndez Morales\n- Date: January 1, 2003\n- Series: Working Paper No. 2003/001\n- Issue: 001\n- Volume: 2003\n- Pages: 32\n- DOI: https://doi.org/10.5089/9781451841657.001\n- Stock No: WPIEA0012003\n- ISBN: 9781451841657\n- ISSN: 1018-5941" }, { "heading": "Subjects and keywords (as provided)", "content": "- Subjects: Asset prices; Currencies; Currency markets; Exchange rates; Financial institutions; Financial markets; Foreign exchange; Money; Options; Prices\n- Keywords: Asset prices; Currencies; currency; Currency markets; currency option volatility; Currency options; Czech Republic; dollar; Eastern Europe; efficient markets; exchange rate volatility; Exchange rates; GMM; koruna currency market; koruna market; market; market development; markets currency; option market; option volatility; Options; OTC derivatives market; Poland; Polish zloty; USD dollar currency option; use currency option; WP; zloty currency market\n\nThis summary is based on the IMF Working Paper \"Testing the Informational Efficiency of OTC Optionson Emerging Market Currencies\" by Jorge A Chan-Lau and Armando Méndez Morales (January 1, 2003, Working Paper No. 2003/001).\n\n---\n\n Content in this bundle\n\n- Testing the Informational Efficiency of OTC Options on Emerging Market Currencies - WP/03/1\n - Testing the Informational Efficiency of OTC Options on Emerging Market Currencies - WP/03/1 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Testing the Informational Efficiency of OTC Options on Emerging Market Currencies - WP/03/1 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/30/testing-the-informational-efficiency-of-otc-optionson-emerging-market-currencies-16214" } ], "bullets": [ "[Markdown version](/en/publications/wp/issues/2016/12/30/testing-the-informational-efficiency-of-otc-optionson-emerging-market-currencies-16214/index.md)", "[Structured JSON version](/en/publications/wp/issues/2016/12/30/testing-the-informational-efficiency-of-otc-optionson-emerging-market-currencies-16214/index.json)", "[Bundle manifest](/en/publications/wp/issues/2016/12/30/testing-the-informational-efficiency-of-otc-optionson-emerging-market-currencies-16214/bundle-manifest.json)", "Authors: Jorge A Chan-Lau, Armando Méndez Morales", "Published: January 1, 2003", "Series: IMF Working Papers", "DOI: https://doi.org/10.5089/9781451841657.001", "The paper analyzes the informational efficiency of OTC currency options on the Czech koruna and the Polish zloty correcting for the volatility risk premium and errors-in-variable problems, using state-of-the-art techniques (Chernov 2001).", "It finds that these markets are more efficient than mature markets.", "Possible explanation: higher relative participation of informed dedicated investors, which offset the effects of relative illiquidity and higher transaction costs in these countries.", "Implied volatilities generally anticipate the direction of volatility correctly, with a bias to overpredicting volatility increases reflecting one-sided markets.", "Corrections applied for the volatility risk premium and errors-in-variable problems.", "Techniques referenced: Chernov 2001 (described as state-of-the-art in the paper).", "Higher measured informational efficiency in these emerging market OTC options may reflect market structure characteristics (greater share of informed dedicated investors) rather than lower transaction costs or greater liquidity.", "The observed bias of implied volatilities to overpredict volatility increases is consistent with one-sided market conditions.", "Authors: Jorge A Chan-Lau, Armando Méndez Morales", "Date: January 1, 2003", "Series: Working Paper No. 2003/001", "Issue: 001", "Volume: 2003", "Pages: 32", "DOI: https://doi.org/10.5089/9781451841657.001", "Stock No: WPIEA0012003", "ISBN: 9781451841657", "ISSN: 1018-5941", "Subjects: Asset prices; Currencies; Currency markets; Exchange rates; Financial institutions; Financial markets; Foreign exchange; Money; Options; Prices", "Keywords: Asset prices; Currencies; currency; Currency markets; currency option volatility; Currency options; Czech Republic; dollar; Eastern Europe; efficient markets; exchange rate volatility; Exchange rates; GMM; koruna currency market; koruna market; market; market development; markets currency; option market; option volatility; Options; OTC derivatives market; Poland; Polish zloty; USD dollar currency option; use currency option; WP; zloty currency market", "**Testing the Informational Efficiency of OTC Options on Emerging Market Currencies - WP/03/1**" ], "related": [ { "title": "Testing the Informational Efficiency of OTC Options on Emerging Market Currencies - WP/03/1", "role": "document", "sourceUrl": "https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2003/_wp0301.pdf", "summary": { "path": "/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2003/_wp0301.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2003/_wp0301.pdf", "mime": "application/pdf" } } ], "alternates": { "markdown": "/en/publications/wp/issues/2016/12/30/testing-the-informational-efficiency-of-otc-optionson-emerging-market-currencies-16214/index.md", "json": "/en/publications/wp/issues/2016/12/30/testing-the-informational-efficiency-of-otc-optionson-emerging-market-currencies-16214/index.json", "bundleManifest": "/en/publications/wp/issues/2016/12/30/testing-the-informational-efficiency-of-otc-optionson-emerging-market-currencies-16214/bundle-manifest.json" }, "generatedAtUtc": "2026-09-17T07:38:39.415Z" }