Assessing Central Bank credibility during the ERM crises: comparing option and spot market-based forecasts

Financial markets embed expectations of central bank policy into asset prices. This paper compares two approaches that extract a probability density of market beliefs. The first is a simulatedmoments estimator for option
Financial markets embed expectations of central bank policy into asset prices. This paper compares two approaches that extract a probability density of market beliefs. The first is a simulatedmoments estimator for option volatilities described in Mizrach (2002); the second is a new approach developed by Haas, Mittnik and Paolella (2004a) for fat-tailed conditionally heteroskedastic time series. In an application to the 1992-93 European Exchange Rate Mechanism crises, that both the options and the underlying exchange rates provide useful information for policy makers. JEL Klassifikation: G12, G14, F31.
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Metadaten
Author:Markus Haas, Bruce Mizrach
URN:urn:nbn:de:hebis:30-10865
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2005,09
Series (Serial Number):CFS working paper series (2005, 09)
Document Type:Working Paper
Language:English
Year of Completion:2005
Year of first Publication:2005
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2005/06/13
Tag:Exchange Rate Mechanism; Fat-tails; GARCH; Implied Probability Densities; Options
SWD-Keyword:GARCH-Prozess; Option; Wechselkurs
Issue:This Version: February 2005
Pagenumber:45
HeBIS PPN:195625935
Institutes:Center for Financial Studies (CFS)
Dewey Decimal Classification:330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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