Financial Markets' Views about the Euro–Swiss Franc Floor

Urban Jermann

Journal of Money, Credit and Banking, 2017, vol. 49, issue 2-3, 553-565

Abstract: Exchange rates and option prices incorporate market participants' views about the credibility and the effects of exchange rate targets. I present a model to determine exchange rates under policy targets that can be used to price options. The model is estimated with Euro–Swiss Franc exchange rate and options price data. In the first few months of the minimum exchange rate policy, the implied survival probability of the policy for a 3‐month horizon was typically less than 75%. Over time, the credibility increased and this probability reached 95% in August 2014.

Date: 2017
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https://doi.org/10.1111/jmcb.12389

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Working Paper: Financial Markets’ Views about the Euro-Swiss Franc Floor (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:49:y:2017:i:2-3:p:553-565

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