Realignment Risk and Currency Option Pricing in Target Zones PDF Download
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Author: Bernard Dumas
Publisher:
ISBN:
Category : Currency convertibility
Languages : en
Pages : 56
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Book Description
This paper extends the Krugman target zone model by including a realignment mechanism. Various properties of that realignment mechanism are discussed. The movement of the exchange rate is governed both by a Wiener process on fundamental and by a Poisson jump process with endogenous realignment size. The realignment mechanism is such that (except in cases where a speculative attack occurs) no jump in fundamental is needed to accompany the jump in the exchange rate. A risk neutral valuation of currency options is constructed. Some properties of option values under realignment risk are illustrated by numerical results.
Author: Bernard Dumas
Publisher:
ISBN:
Category : Currency convertibility
Languages : en
Pages : 56
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Book Description
This paper extends the Krugman target zone model by including a realignment mechanism. Various properties of that realignment mechanism are discussed. The movement of the exchange rate is governed both by a Wiener process on fundamental and by a Poisson jump process with endogenous realignment size. The realignment mechanism is such that (except in cases where a speculative attack occurs) no jump in fundamental is needed to accompany the jump in the exchange rate. A risk neutral valuation of currency options is constructed. Some properties of option values under realignment risk are illustrated by numerical results.
Author: Mr.Leonardo Bartolini
Publisher: International Monetary Fund
ISBN: 1451921195
Category : Business & Economics
Languages : en
Pages : 54
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Book Description
This paper studies the implications of the imperfect credibility of an exchange rate target zone on the term structure of forward premia. The relationship between spot and forward exchange rates of different maturities reflects the possibility of repeated realignments of the exchange rate band. The credibility of the commitment to the target zone implicit in forward market data can be extracted by estimating the model. Application to French/German data indicates that the model is capable of matching observed patterns of interest rate differentials during the EMS, while yielding estimates of the credibility parameters that accord with the experience of the FF/DM exchange rate during the 1980s.
Author:
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 618
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Book Description
Author:
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 560
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Book Description
Author:
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 376
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Book Description
Author: Bibliothèque centrale (Fonds Quetelet)
Publisher:
ISBN:
Category :
Languages : en
Pages : 716
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Book Description
Author:
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 946
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Book Description
Author:
Publisher:
ISBN:
Category : Classification
Languages : en
Pages : 916
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Book Description
Author: Stephen S. Bonham
Publisher: Artech House
ISBN: 1596931205
Category : Business & Economics
Languages : en
Pages : 279
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Book Description
This unique resource presents a new look at how the puzzle pieces of corporate dynamics management can fit together to ensure strategic designs are actionable.
Author: Sinimaaria Ranki
Publisher:
ISBN:
Category : Banks and banking
Languages : en
Pages : 180
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Book Description
The purpose of this study is to analyze realignment expectations in the exchange rate mechanism of the European Monetary System, in particular with reference to the five year period (1987-1992) during which no realignments were done.
