Czech Koruna and Polish Zloty Currency Options: Information Contnent and Eu-Accession Implications

June 1, 2000

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Armando Méndez Morales. Czech Koruna and Polish Zloty Currency Options: Information Contnent and Eu-Accession Implications, (USA: International Monetary Fund, 2000) accessed November 21, 2024

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

Currency option implied volatility predicts more efficiently exchange rate volatility for the Polish zloty relative to the Czech koruna, reflecting differences in the frequency of central bank intervention in the foreign exchange market. A GARCH model shows a positive impact of the introduction of the Euro on exchange rate volatility for the Polish zloty (negative for the Czech koruna), related to its larger exposure to external shocks. For countries in transition to Euro integration, the implied trade-off between isolation from shocks and efficient signaling must be addressed based on the risk of exchange rate misalignment at the time of monetary conversion.

Subject: Bank resolution, Central bank operations, Central banks, Crawling peg, Currencies, Currency markets, Exchange rates, Financial markets, Foreign exchange, Money

Keywords: Central bank intervention, Central bank operations, Crawling peg, Currencies, Currency, Currency markets, Eastern Europe, Euro, Euro exchange rate, Euro market, Exchange rate, Exchange rate band, Exchange rate depreciation, Exchange rate return, Exchange rate volatility, Exchange rates, Foreign exchange market, Integration, Option market, Options, Poland, Return equation, Volatility, Volatility fluctuation, WP

Publication Details

Pages:

36
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2000/091
Stock No:

WPIEA0912000
ISBN:

9781451851502
ISSN:

1018-5941

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