Download or read book Deriving Market Expectations for the Euro Dollar Exchange Rate from Option Prices written by Noureddine Krichene and published by . This book was released on 2006 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: Option prices provide valuable information on market expectations. This paper attempts to extract market expectations, as conveyed by an implied risk-neutral probability distribution, from option prices for the dollar-euro exchange rate. Returns` volatilities are inferred from observed and interpolated option prices. To address robustness, two distributions, one from actual data and the other from interpolated data, were computed. The main conclusion of the paper is that traders have wide-ranging expectations, and large movements in either direction would not occur as a surprise. The main implication for monetary policy is that should markets become too volatile, then intervention may be required.

Download or read book Deriving Market Expectations for the Euro Dollar Exchange Rate from Option Prices written by Noureddine Krichene and published by International Monetary Fund. This book was released on 2004-10 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: Option prices provide valuable information on market expectations. This paper attempts to extract market expectations, as conveyed by an implied risk-neutral probability distribution, from option prices for the dollar-euro exchange rate. Returns' volatilities are inferred from observed and interpolated option prices. To address robustness, two distributions, one from actual data and the other from interpolated data, were computed. The main conclusion of the paper is that traders have wide-ranging expectations, and large movements in either direction would not occur as a surprise. The main implication for monetary policy is that should markets become too volatile, then intervention may be required.

Download or read book Extracting Market Expectations from Options Prices written by Áron Gereben and published by . This book was released on 2002 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Currency Options and Exchange Rate Economics written by Zhaohui Chen and published by World Scientific. This book was released on 1998 with total page 224 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume is a collection of classical and recent empirical studies of currency options and their implications for issues of exchange rate economics, such as exchange rate risk premium, volatility, market expectations, and credibility of exchange rate regimes. It contains applications on how to extract useful information from option market data for financial forecasting policy purposes. The subjects are discussed in a self-contained, user-friendly format, with introductory chapters on currency option theory and currency option markets. The book can be used as supplementary reading for graduate finance and international economics courses, as training material for central bank and regulatory authorities, or as a reference book for financial analysts.

Download or read book Market Expectations and Option Prices written by Martin Mandler and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 227 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is a slightly revised version of my doctoral dissertation which has been accepted by the Department of Economics and Business Administration of the Justus-Liebig-Universitat Giessen in July 2002. I am indebted to my advisor Prof. Dr. Volbert Alexander for encouraging and supporting my research. I am also grateful to the second member of the doctoral committee, Prof. Dr. Horst Rinne. Special thanks go to Dr. Ralf Ahrens for providing part of the data and to my colleague Carsten Lang, who spent much time reading the complete first draft. Wetzlar, January 2003 Martin Mandler Contents 1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Part I Theoretical Foundations 2 Arbitrage Pricing and Risk-Neutral Probabilities........ .. 7 2.1 Arbitrage Pricing in the Black/Scholes-Merton Model... . . .. . 7 2.2 The Equivalent Martingale Measure and Risk-Neutral Valuation ............................................... 11 2.3 Extracting Risk-Neutral Probabilities from Option Prices. . . .. 13 2.4 Summary............................................... 15 Appendix 2A: The Valuation Function in the Black/Scholes-Merton Model .................................................. 16 Appendix 2B: Some Further Details on the Replication Strategy ... 21 3 Survey of the Related Literature .......................... 23 3.1 The Information Content of Forward and Futures Prices. . . .. . 24 3.2 The Information Content of Implied Volatilities ............. 25 3.2.1 Implied Volatilities and the Risk-Neutral Probability Density .......................................... 27 3.2.2 The Term Structure of Implied Volatilities. . . . . . . .. . . 29 . 3.2.3 The Forecasting Information in Implied Volatilities. . .. 30 3.2.4 Implied Correlations as Forecasts of Future Correlations 43 VIII Contents 3.3 The Skewness Premium ..... . . . . . . . . . . . . . . . . . . .. . . 45 . . . . . . .

Download or read book Using Option Prices to Estimate Realignment Probabilities in the European Monetary System written by Allan M. Malz and published by . This book was released on 2007 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: Risk reversals are a combination of options from which price information about market expectations of future exchange rates can be extracted. This paper describes a procedure for estimating the market's perceived probability distribution of future exchange rates from the prices of risk reversals and other currency options. This procedure is used to estimate the ex ante probability of a realignment of the French franc and pound sterling. The procedure for estimating the realignment probabilities relies on the jump-diffusion model of exchange rate behavior and the resulting option pricing formula. By fitting this model to market option price data, the unobserved parameters of the jump-diffusion process are retrieved. These parameter estimates form the basis for estimating the ex ante probability distribution of exchange rates and thus the realignment probabilities.

Download or read book Options on Foreign Exchange and Exchange Rate Expectations written by Eduardo Borensztein and published by . This book was released on 2006 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper tests alternative assumptions concerning the time series behavior of foreign exchange rates. Data for about 20,000 individual trades on foreign exchange options for dollar exchange rates against six major currencies carried out from February 1983 to June 1985 are analyzed. The tests carried out suggest that, judging from the predictions of a model of options prices based on the assumption that exchange rates follow a diffusion process, market participants paid too high a price for call options that would have been profitable only if the dollar depreciated substantially within a short time period. An alternative model which allows for discrete jumps in exchange rates is found to be more consistent with the data.

Download or read book Testing the Informational Efficiency of OTC Options on Emerging Market Currencies written by Jorge A. Chan-Lau and published by . This book was released on 2003 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Regional Economic Outlook May 2005 Sub Saharan Africa written by International Monetary Fund. African Dept. and published by International Monetary Fund. This book was released on 2006-04-20 with total page 97 pages. Available in PDF, EPUB and Kindle. Book excerpt: The five Regional Economic Outlooks published biannually by the IMF cover Asia and Pacific, Europe, the Middle East and Central Asia, Sub-Saharan Africa, and the Western Hemisphere. In each volume, recent economic developments and prospects for the region are discussed as a whole, as well as for specific countries. The reports include key data for countries in the region. Each report focuses on policy developments that have affected economic performance in the region, and discusses key challenges faced by policymakers. The near-term outlook, key risks, and their related policy challenges are analyzed throughout the reports, and current issues are explored, such as when and how to withdraw public interventions in financial systems globally while maintaining a still-fragile economic recovery.These indispensable surveys are the product of comprehensive intradepartmental reviews of economic developments that draw primarily on information the IMF staff gathers through consultation with member countries.

Download or read book Regional Economic Outlook May 2006 Sub Saharan Africa written by International Monetary Fund. African Dept. and published by International Monetary Fund. This book was released on 2006-07-21 with total page 132 pages. Available in PDF, EPUB and Kindle. Book excerpt: Prepared by the Policy Wing of the IMF African Department, and published twice a year in English and French, Regional Economic Outlook: Sub-Saharan Africa analyzes economic performance and short-term prospects of the 44 countries covered by the Department. Topics examined in recent volumes include responses to exogenous shocks, growth performance and growth-enhancing policies, the effectiveness of regional trade arrangements, macroeconomic implications of scaled-up aid, financial sector development, and fiscal decentralization. Detailed country data, grouped by oil-exporting and -importing countries and by subregion, are provided in an appendix and a statistical appendix, and a list of relevant publications by the African Department is included.

Download or read book Regional Economic Outlook Fall 2006 Sub Saharan Africa Supplement written by International Monetary Fund. African Dept. and published by International Monetary Fund. This book was released on 2006-05-03 with total page 78 pages. Available in PDF, EPUB and Kindle. Book excerpt: Provides a broad synopsis of recent economic developments in the Middle East and Central Asia region, highlighting common trends and policies among countries in the region, and reviewing prospects and policies for the coming year. Includes a statistical appendix.

Download or read book Predicting Nominal Exchange Rate Movements Using Skewness Information from Options Prices written by Ryan Ratcliff and published by . This book was released on 2013 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses a measure of the relative price of out-of-the-money (OTM) European put and call currency options to forecast daily movements in the dollar/euro exchange rate over the period of January 2002 to June 2004. Since these OTM options are pure bets on future movements of the exchange rate, their relative price contains information about the market's estimate of the relative probabilities of appreciation or depreciation of the euro over the life of the options. Forecasts that include the relative price of the OTM options offer significantly better out-of-sample predictions of tomorrow's exchange rate than either the simple random walk or an interest rate parity model. These results offer new insight into the puzzle of the day-to-day volatility of currency prices that should be driven by slow-moving macro fundamentals.

Download or read book Regional Economic Outlook April 2008 Sub Saharan Africa written by International Monetary Fund. African Dept. and published by International Monetary Fund. This book was released on 2008-04-14 with total page 145 pages. Available in PDF, EPUB and Kindle. Book excerpt: The region's prospects continue to be promising, but global developments pose increased risks to the outlook. Growth in sub-Saharan Africa should again average about 61⁄2 percent in 2008 with oil exporters leading the way; meanwhile, growth in oil importers is expected to taper off, though only modestly. With food and energy prices still rising, inflation is projected to average about 81⁄2 percent this year for countries in the region, setting aside Zimbabwe. Risks in 2008 are tilted to the downside, but the region is better placed today to withstand a worsening of the global environment.

Download or read book Exchange Rates in Search of Fundamentals written by Paul de Grauwe and published by . This book was released on 2000 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Regional Economic Outlook October 2008 Sub Saharan Africa written by International Monetary Fund. African Dept. and published by International Monetary Fund. This book was released on 2008-10-10 with total page 99 pages. Available in PDF, EPUB and Kindle. Book excerpt: Sub-Saharan Africa's prospects have deteriorated somewhat and the risks have increased, according to this report. Growth in the region is projected to dip to 6 percent in 2008 and 2009. The fall is due mainly to the global food and fuel price shock, which has weighed particularly on growth in oil-importing countries, and to the global financial market turmoil, which has slowed global growth and demand for Africa's exports. Inflation is expected to rise to 12 percent in 2008, mainly on account of the food and fuel price shock. As a result of rising prices, particularly of food, poverty may well be on the increase in 2008. In 2009, inflation should ease to 10 percent, helped by recent commodity price declines. There are significant risks to the outlook related to a potentially deeper and longer period of global financial turmoil and resulting slowdown in global activity, and substantial uncertainty concerning commodity prices.

Download or read book Regional Economic Outlook October 2007 Sub Saharan African written by International Monetary Fund. African Dept. and published by International Monetary Fund. This book was released on 2007-10-15 with total page 84 pages. Available in PDF, EPUB and Kindle. Book excerpt: The region's prospects look strong. Growth in sub-Saharan Africa should reach 6 percent in 2007 and 63⁄4 percent in 2008. The economic expansion is strongest in oil exporters but cuts across all country groups. This would extend a period of very good performance. In recent years, sub-Saharan Africa has been experiencing its strongest growth and lowest inflation in over 30 years.

Download or read book Market Volatility and Foreign Exchange Intervention in EMEs written by Banco de Pagos Internacionales (Basilea, Suiza). Departamento Monetario y Económico and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: