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Review of Quantitative Finance and Accounting
Published in: Review of Quantitative Finance and Accounting 1/2008

01-01-2008 | Original Paper

Option volume, strike distribution, and foreign exchange rate movements

Authors: Mark Cassano, Bing Han

Published in: Review of Quantitative Finance and Accounting | Issue 1/2008

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Abstract

Using Deutschmark currency option data from the Philadelphia Stock Exchange and British pound option data from the Chicago Mercantile Exchange, this article examines the signaling quality of option volume measures on movements in the underlying spot exchange rates. The concept of a volume-weighted strike distribution is proposed. It is demonstrated that measures using the strike distribution are inherently better predictors of both direction and volatility of the exchange rate movements as compared to their more traditional counterparts used in practice, such as the put-call ratio.
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Appendix
Available only for authorised users
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Metadata
Title
Option volume, strike distribution, and foreign exchange rate movements
Authors
Mark Cassano
Bing Han
Publication date
01-01-2008
Publisher
Springer US
Published in
Review of Quantitative Finance and Accounting / Issue 1/2008
Print ISSN: 0924-865X
Electronic ISSN: 1573-7179
DOI
https://doi.org/10.1007/s11156-007-0041-z

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