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Toward Removal of the Swiss Franc Cap: Market Expectations and Verbal Interventions

Nikola Mirkov (), Igor Pozdeev () and Paul Söderlind
Authors registered in the RePEc Author Service: Paul Söderlind ()

No 2016-10, Working Papers from Swiss National Bank

Abstract: We ask whether the markets expected the Swiss National Bank (SNB) to discontinue the 1.20 cap on the Swiss franc against the euro in January 2015. In the runup to the SNB announcement, neither options on the euro/Swiss franc nor FX liquidity indicated a significant shift in market expectations. Furthermore, we find that the SNB's verbal interventions during the period of cap enforcement increased the credibility of the cap by reducing the uncertainty of future euro/Swiss franc rate. We conclude that the markets did not anticipate the discontinuation of the policy.

Keywords: Swiss franc; implied volatilities; market expectations (search for similar items in EconPapers)
JEL-codes: E58 E44 G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-mon
Date: 2016
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