An extended model of currency options applicable as policy tool for central banks with inflation targeting and dollarized economies
MPRA Paper from University Library of Munich, Germany
The purpose of this paper is to provide a new set of tools for policy makers at central banks. Based on the Garman-Kohlhagen formula for currency options, this research extends it with the Taylor-rule expression used for inflation targeting, thus obtaining the corresponding Call and Put options and higher-degree partial derivatives known as "Greeks" for key variables such as the policy target domestic interest rate and the output gap.
Keywords: Inflation Targeting; Central bank policies; Exchange rates; Currency options. (search for similar items in EconPapers)
JEL-codes: E4 E44 E58 F31 G13 (search for similar items in EconPapers)
Date: 2013-03-05, Revised 2013-04-15
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Published in Theoretical Economics Letters June.3(2013): pp. 164-167
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:52880
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