Toward Removal of the Swiss Franc Cap: Market Expectations and Verbal Interventions

Nikola Mirkov, Igor Pozdeev () and Paul Söderlind

No 1614, Working Papers on Finance from University of St. Gallen, School of Finance

Abstract: We ask whether the markets expected the Swiss National Bank (SNB) to discontinue the 1.20 cap on the Swiss franc against the euro in January 2015. In the run-up to the SNB announcement, neither options on the euro/Swiss franc nor FX liquidity indicated a significant shift in market expectations. Furthermore, we find that the SNB's verbal interventions during the period of cap enforcement reduced the uncertainty of future euro/Swiss franc rate significantly and therefore reinforced the perceived continuation of the policy.

Keywords: Swiss franc; risk-neutral distribution; FX liquidity; verbal interventions (search for similar items in EconPapers)
JEL-codes: E44 E58 G12 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2016-07
New Economics Papers: this item is included in nep-eec, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Working Paper: Toward Removal of the Swiss Franc Cap: Market Expectations and Verbal Interventions (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:usg:sfwpfi:2016:14

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