Classical and Impulse Stochastic Control of the Exchange Rate Using Interest Rates and Reserves

Abel Cadenillas and Fernando Zapatero

Mathematical Finance, 2000, vol. 10, issue 2, 141-156

Abstract: We consider the problem of a Central Bank that wants the exchange rate to be as close as possible to a given target, and in order to do that uses both the interest rate level and interventions in the foreign exchange market. We model this as a mixed classical‐impulse stochastic control problem, and provide for the first time a solution to that kind of problem. We give examples of solutions that allow us to perform an interesting economic analysis of the optimal strategy of the Central Bank.

Date: 2000
References: Add references at CitEc
Citations: View citations in EconPapers (32)

Downloads: (external link)
https://doi.org/10.1111/1467-9965.00086

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:mathfi:v:10:y:2000:i:2:p:141-156

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0960-1627

Access Statistics for this article

Mathematical Finance is currently edited by Jerome Detemple

More articles in Mathematical Finance from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().