Czech Koruna and Polish Zloty: Spot and Currency Option Volatility Patterns

Armando Méndez Morales

No 2001/120, IMF Working Papers from International Monetary Fund

Abstract: Exchange rate flexibility has facilitated an impressively fast insertion of the Czech koruna and the Polish zloty into the global currency market. However, exchange rate volatility patterns differ: Lower volatility is observed for the koruna against the euro relative to the U.S. dollar, while the opposite is true for the zloty, apparently related to earlier financial integration of the Czech Republic with Europe and early dollarization in Poland as a result of initial higher inflation rates. By contrast, the currency options market shows enhanced information content of both currencies against the euro reflected in the behavior of their implied volatility.

Keywords: WP; break; exchange rate; Polish zloty; U.S. dollar; zloty; volatility; Eastern Europe; options; currency option; option volatility; option market; financial market; Exchange rates; Currencies; Currency markets; Exchange rate policy (search for similar items in EconPapers)
Pages: 30
Date: 2001-08-01
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Citations: View citations in EconPapers (2)

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