EconPapers    
Economics at your fingertips  
 

Assessing Central Bank Credibility During the EMS Crises: Comparing Option and Spot Market-Based Forecasts

Markus Haas (), Stefan Mittnik and Bruce Mizrach ()
Additional contact information
Bruce Mizrach: Rutgers University

Departmental Working Papers from Rutgers University, Department of Economics

Abstract: Financial markets embed expectations of central bank policy into asset prices. This paper compares two approaches that extract a probability density of market beliefs. The first is a simulated moments estimator for option volatilities described in Mizrach (2002); the second is a new approach developed by Haas, Mittnik and Paolella (2004a) for fat-tailed conditionally heteroskedastic time series. We find, in an application to the ERM crises of 1992-93, that both the options and the underlying exchange rates provide useful information for policy makers.

Keywords: options; implied probability densities; GARCH; fat-tails; European Monetary System (search for similar items in EconPapers)
JEL-codes: G12 G14 F31 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2004-10-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

Published in Journal of Financial Stability 2, 2006, 28-54

Downloads: (external link)
http://www.sas.rutgers.edu/virtual/snde/wp/2004-24.pdf (application/pdf)

Related works:
Journal Article: Assessing central bank credibility during the ERM crises: Comparing option and spot market-based forecasts (2006) Downloads
Working Paper: Assessing central bank credibility during the EMS crises: Comparing option and spot market-based forecasts (2005) Downloads
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:rut:rutres:200424

Access Statistics for this paper

More papers in Departmental Working Papers from Rutgers University, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2020-01-18
Handle: RePEc:rut:rutres:200424