Central Bank Foreign Exchange Market Intervention and Option Contract Specification: The Case of Colombia

 
Author/Editor: Mandeng, Ousmène
 
Publication Date: June 01, 2003
 
Electronic Access: Free Full text (PDF file size is 514KB).
Use the free Adobe Acrobat Reader to view this PDF file

 
Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: This paper aims to identify appropriate option contract specifications for effective central bank exchange market intervention. Option contract specifications determine the impact of options on the underlying asset or currency, and hence their actual effect on asset price or currency volatility and are therefore key to determining the effectiveness of option-based intervention. The paper reviews the experience of the systematic option-based foreign exchange market intervention of the Central Bank of Colombia and finds that its contract has only been moderately successful at abating exchange rate volatility, which is attributed here to sub-optimal contract specifications.
 
Series: Working Paper No. 03/135
Subject(s): Exchange markets | Colombia | Central banks | Intervention

Author's Keyword(s): Options | Colombia
 
English
Publication Date: June 01, 2003
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA1352003 Pages: 16
Price:
US$15.00 (Academic Rate:
US$15.00 )
 
 
Please address any questions about this title to publications@imf.org