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The Credibility of the Exchange Rate Regime: An Analysis trough “Derivatives” of the September 1992 Crisis

Author

Listed:
  • Garofalo, Giuseppe
  • Barbato, Fabio

Abstract

This paper argues that, in the September 1992 European currency crisis, market trends in derivatives, in terms of price volatility and change in volumes traded, might have represented an early indicator, in reference to the spot market, of the lack of confidence in the ability of the Italian Lira and the Sterling Pound to maintain their parities within the ERM. The assessment is made by comparing the daily data on Italian/English interbank rates with the implicit yield on short-term interest rate futures and with a maximum compatible with the ERM band created by means of German interbank rates and changes in the exchange rates

Suggested Citation

  • Garofalo, Giuseppe & Barbato, Fabio, 1996. "The Credibility of the Exchange Rate Regime: An Analysis trough “Derivatives” of the September 1992 Crisis," MPRA Paper 13360, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:13360
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    File URL: https://mpra.ub.uni-muenchen.de/13360/1/MPRA_paper_13360.pdf
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    More about this item

    Keywords

    Derivatives; Exchange rates; Volatility;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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