Fx interventions + currency options.Sumantra.Pal

How to intervene in foreign exchange market withoutbuying/selling dollars?

Sumantra Pal

National Graduate Institute for Policy Studies

sumantrapal@gmail.com

July 2,2015

Sumantra Pal (GRIPS) Fx intervention + Currency options July 2,2015 1 / 12

market: any day

market expectations

How to monitor?

How to anchor?

market expectations

How to monitor?

How to anchor?

market expectations

Counter-factual: What if?

Spot-intervention?

Options-based intervention?

Counter-factual: What if?

Spot-intervention?

Options-based intervention?

Spot-intervention

Options-based intervention

sell options: short

buy options:long

both:spread

at same strike: straddle

at different strike: strangle

at several: risk-reversal

short-straddle + butterfly spread

sell options: short

buy options:long

both:spread

sell options: short

buy options:long

both:spread

sell options: short

buy options:long

both:spread

sell options: short

buy options:long

both:spread

sell options: short

buy options:long

both:spread

sell options: short

buy options:long

both:spread

a short straddle

a butterfly spread

a day, another day, any day

Do if:

liquid fx options market

exchange-traded + cash-settled in domestic currency

learn from:

Australia, Colombia, Mexico

improve:

Ross Recovery Theorem (JF, 2015)

derive real-world density

derive and monitor changes in risk-preference

Do if:

learn from:

improve:

Do if:

learn from:

improve:

Do if:

learn from:

improve:

Do if:

learn from:

improve:

Do if:

learn from:

improve:

Do if:

learn from:

improve:

Do if:

learn from:

improve:

Do if:

learn from:

improve:

everyday + bad day

Do it everyday

Don’t over-do it

It can save your day, some day

everyday + bad day

Do it everyday

Don’t over-do it

everyday + bad day

Do it everyday

Don’t over-do it

Fx interventions + currency options.Sumantra.Pal

Documents

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CHAPTER 10. CURRENCY SWAPS - hguywilliams - FNCE5205/FNCE5206...CHAPTER 10. CURRENCY SWAPS ... currency when performing analyses of hedging FX exposure. ... situations where foreign

FX Risk Advisory benchmarking series: Currency ......2020/12/03 · FX RISK ADVISORY BENCHMARKING SERIES 5 Awareness that currency impacts business results is high … However, the