Articlegreen1999

Market Expectations in the UK Before and After the ERM Crisis

13 citations0/0 files storedAlexandria (UniSG) (University of St.Gallen)

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Monetary Policy and Economic Impact Global Financial Crisis and Policies Stochastic processes and financial applications

Abstract

The British pound left the ERM on 16 September 1992 after a period of turbulence. UK monetary policy soon shifted to lower short interest rates and an inflation target was announced. This paper uses daily option prices to estimate how the market's probability distribution of the future marks/pound exchange rate and UK and German interest rates changed over the summer and autumn of 1992. The results show, among other things, how various policy decisions affected the market's assessment of the probabilities of realignments and lending rate cuts.

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1989A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle 1976The valuation of options for alternative stochastic processes 1993Dynamic Asset Pricing Theory.1996Erratum: The likelihood ratio test under nonstandard conditions: Testing the Markov switching model of GNP 1997Recovering an Asset's Implied PDF from Option Prices: An Application to Crude Oil during the Gulf Crisis 1997New Techniques to Extract Market Expectations from Financial Instruments 1990CALL OPTION VALUATION FOR DISCRETE NORMAL MIXTURES 1999Financial Market Analysis

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