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On the existence and uniqueness of the optimal central bank intervention policy in a forex market with jumps

Author

Listed:
  • Sandun Perera

    (University of Michigan–Flint)

  • Winston Buckley

    (Bentley University)

Abstract

We study a central bank intervention (CBI) problem in the foreign exchange market when the exchange rate follows a jump-diffusion process and show that the optimal CBI policy is a control-band policy. Our main contribution is a rigorous proof of the existence and uniqueness of the optimal CBI policy.

Suggested Citation

  • Sandun Perera & Winston Buckley, 2017. "On the existence and uniqueness of the optimal central bank intervention policy in a forex market with jumps," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 68(8), pages 877-885, August.
    • Handle: RePEc:pal:jorsoc:v:68:y:2017:i:8:d:10.1057_s41274-017-0208-5
    DOI: 10.1057/s41274-017-0208-5
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