Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152874
Authors: 
Castrén, Olli
Year of Publication: 
2005
Series/Report no.: 
ECB Working Paper 440
Abstract: 
This paper uses data on currency options prices for the exchange rates of the three largest new EU member states Poland, Czech Republic and Hungary vis-à-vis the euro and the US dollar to estimate the risk-neutral density (RND) functions and the density interval bands. Analysing the RNDs, we find that only some of the implied moments on the Polish zloty exchange rate systematically move around policy events, while the implied moments on the RNDs on the Czech koruna and Hungarian forint show more systematic changes. Regarding the HUF/EUR currency pair, monetary policy news have a significant impact on all moments, while changes in implied standard deviation signal a higher probability of interest rate changes by the Hungarian central bank. The more marked results for HUF/EUR exchange rate could reflect the fixed exchange rate regime prevailing throughout the sample period.
Subjects: 
currency options data
Foreign exchange rate market sentiment
monetary policy news
JEL: 
E52
F31
G15
Document Type: 
Working Paper

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