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Central Bank Participation in Currency Options Markets
By:Mr. Peter Breuer
Published on 1999-10-01 by International Monetary Fund

This paper analyzes whether and how central banks can use currency options to lower exchange rate volatility and maintain (implicit) target zones in foreign exchange markets. It argues that selling rather than buying options will result in market makers dynamically hedging their long option exposure in a stabilizing manner, consistent with the first objective. Selling a “strangle” allows a central bank to increase the credibility of its commitment to a target zone, and could have a lower expected cost than spot market interventions. However, this strategy also exposes the central bank to an unlimited loss potential.
This Book was ranked at 39 by Google Books for keyword Currency.
Book ID of Central Bank Participation in Currency Options Markets's Books is 2lfdncDzuIkC, Book which was written byMr. Peter Breuerhave ETAG "LdvgAs2VE5Q"
Book which was published by International Monetary Fund since 1999-10-01 have ISBNs, ISBN 13 Code is 9781451901269 and ISBN 10 Code is 1451901267
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