Central Bank Foreign Exchange Market Intervention and Option Contract Specification: The Case of Colombia

WPIEA1352003 Image
Price:  $15.00

Author/Editor: Ousmène Mandeng
Release Date: © June, 2003
ISBN : 978-1-45185-572-2
Stock #: WPIEA1352003
English
Stock Status: Available

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Description

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.

Taxonomy

Banks and banking , Capital markets , Central banks , Exchange markets , Financial institutions and markets , Foreign exchange , Options




More publications in this series: Working Papers


More publications by: Ousmène Mandeng