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An Interpretation of Czech FX Options

Author

Listed:
  • Pavel Bouc
  • Martin Cincibuch

Abstract

This paper opens with a brief description of the Czech FX options market. Several case studies of the Czech koruna option market illustrate how options reflect market sentiment and structural breaks. Risk-neutral implied distributions are suggested as a monitoring tool. Moreover, clear indications of the rational, forward-looking behavior of option prices were identified before the Czech Republic?s 1997 currency crisis, and the results of statistical tests support the ?rational market? hypothesis.

Suggested Citation

  • Pavel Bouc & Martin Cincibuch, 2004. "An Interpretation of Czech FX Options," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 54(7-8), pages 286-304, July.
  • Handle: RePEc:fau:fauart:v:54:y:2004:i:7-8:p:286-304
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    File URL: http://journal.fsv.cuni.cz/storage/978_s_286_304.pdf
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    Cited by:

    1. Martin Cincibuch, 2002. "Distributions Implied by Exchange Traded Options: A Ghost’s Smile?," CERGE-EI Working Papers wp200, The Center for Economic Research and Graduate Education - Economics Institute, Prague.

    More about this item

    Keywords

    currency options; emerging markets; risk-neutral distributions; efficiency tests; OTC;

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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