Resource title

Assessing central bank credibility during the EMS crises: comparing option and spot market-based forecasts

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Resource description

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.

Resource author

Markus Haas, Stefan Mittnik, Bruce Mizrach

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/25418

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Adapt according to the presented license agreement and reference the original author.