An extended model of currency options applicable as policy tool for central banks with inflation targeting and dollarized economies

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.

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Year of publication:	2013-03-05
Authors:	Arizmendi, Luis-Felipe
Institutions:	Volkswirtschaftliche Fakultät, Ludwig-Maximilians-Universität München
Subject:	Inflation Targeting \| Central bank policies \| Exchange rates \| Currency options

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Extent:	application/pdf
Series:	MPRA Paper.
Type of publication:	Book / Working Paper
Notes:	Published in Theoretical Economics Letters June.3(2013): pp. 164-167
Classification:	E4 - Money and Interest Rates ; E44 - Financial Markets and the Macroeconomy ; E58 - Central Banks and Their Policies ; F31 - Foreign Exchange ; G13 - Contingent Pricing; Futures Pricing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011107280