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 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.
| 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: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2005/06/13 |
| Tag: | Exchange Rate Mechanism; Fat-tails; GARCH; Implied Probability Densities; Options |
| GND Keyword: | Option; GARCH-Prozess; Wechselkurs |
| Issue: | This Version: February 2005 |
| Page Number: | 45 |
| HeBIS-PPN: | 195625935 |
| Institutes: | Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Licence (German): |  Deutsches Urheberrecht |
