Central Bank Foreign Exchange Market Intervention and Option Contract Specification The Case of Colombia
This paper aims to identify appropriate option contract specifications for effective central bank exchange market intervention. Option contract specifications determine the impact of options on the underlying asset or currency, and hence their actual effect on asset price or currency volatility and...
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| Format: | eBook |
| Language: | English |
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Washington, D.C.
International Monetary Fund
2003
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| Series: | IMF Working Papers
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| Collection: | International Monetary Fund - Collection details see MPG.ReNa |
| Summary: | This paper aims to identify appropriate option contract specifications for effective central bank exchange market intervention. Option contract specifications determine the impact of options on the underlying asset or currency, and hence their actual effect on asset price or currency volatility and are therefore key to determining the effectiveness of option-based intervention. The paper reviews the experience of the systematic option-based foreign exchange market intervention of the Central Bank of Colombia and finds that its contract has only been moderately successful at abating exchange rate volatility, which is attributed here to sub-optimal contract specifications |
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| Physical Description: | 17 pages |
| ISBN: | 9781451855722 |