Skip to main content

Main menu

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JOD
    • Editorial Board
    • Published Ahead of Print (PAP)
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

User menu

  • Sample our Content
  • Request a Demo
  • Log in

Search

  • ADVANCED SEARCH: Discover more content by journal, author or time frame
The Journal of Derivatives
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Sample our Content
  • Request a Demo
  • Log in
The Journal of Derivatives

The Journal of Derivatives

ADVANCED SEARCH: Discover more content by journal, author or time frame

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JOD
    • Editorial Board
    • Published Ahead of Print (PAP)
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

Exchange Rate Market Expectations and Central Bank Policy: The Case of the Mexican Peso/U.S. Dollar from 2005–2009

Gustavo Lesser Abarca, Guillermo Benavides and José Gonzalo Rangel
The Journal of Derivatives Summer 2012, 19 (4) 70-90; DOI: https://doi.org/10.3905/jod.2012.19.4.070
Gustavo Lesser Abarca
is a specialist coordinator at Pemex in Mexico City, Mexico.
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • For correspondence: gustavo.lesser.abarca@pemex.com
Guillermo Benavides
is a senior economist at Banco de México in Mexico City, Mexico.
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • For correspondence: gbenavid@banxico.org.mx
José Gonzalo Rangel
is a research associate in Global Investment Research at Goldman Sachs Group, Inc., in New York, NY.
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • For correspondence: josegonzalo.rangel@gs.com
  • Article
  • Info & Metrics
  • PDF (Subscribers Only)
Loading

Click to login and read the full article.

Don’t have access? Click here to request a demo 

Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600

Abstract

That an implied volatility can be extracted from the market price for an option is well known. Less familiar is the fact that with a set of options with the same maturity and a range of strike prices, an estimate of the entire risk-neutral probability density (RND) can be extracted without the need to specify the market’s option pricing model. There are several alternative ways to do this in the literature, and the authors examine two of them. The behavior of the RND provides a detailed look at how the market’s (risk-neutral) expectations respond to important information events, such as a change in the interest rate target followed by the central bank. In this article, the authors look at how these monetary policy decisions by the U.S. Federal Reserve and the Banco de México are reflected in the market for FX options on the peso/U.S. dollar exchange rate. The results show that the exchange rate RNDs do respond significantly to interest rate surprises, and the extraction procedure that completes the RND by adding tails from a generalized extreme value distribution appears to have more success in capturing extreme values than does the alternative procedure that imposes a tail shape.

TOPICS: Options, tail risks, exchanges/markets/clearinghouses

  • © 2012 Pageant Media Ltd
View Full Text

Don’t have access? Click here to request a demo

Alternatively, Call a member of the team to discuss membership options

US and Overseas: +1 646-931-9045

UK: 0207 139 1600

Log in using your username and password

Forgot your user name or password?
PreviousNext
Back to top

Explore our content to discover more relevant research

  • By topic
  • Across journals
  • From the experts
  • Monthly highlights
  • Special collections

In this issue

The Journal of Derivatives: 19 (4)
The Journal of Derivatives
Vol. 19, Issue 4
Summer 2012
  • Table of Contents
  • Index by author
Print
Download PDF
Article Alerts
Sign In to Email Alerts with your Email Address
Email Article

Thank you for your interest in spreading the word on The Journal of Derivatives.

NOTE: We only request your email address so that the person you are recommending the page to knows that you wanted them to see it, and that it is not junk mail. We do not capture any email address.

Enter multiple addresses on separate lines or separate them with commas.
Exchange Rate Market Expectations and Central Bank Policy: The Case of the Mexican Peso/U.S. Dollar from 2005–2009
(Your Name) has sent you a message from The Journal of Derivatives
(Your Name) thought you would like to see the The Journal of Derivatives web site.
CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.
Citation Tools
Exchange Rate Market Expectations and Central Bank Policy: The Case of the Mexican Peso/U.S. Dollar from 2005–2009
Gustavo Lesser Abarca, Guillermo Benavides, José Gonzalo Rangel
The Journal of Derivatives May 2012, 19 (4) 70-90; DOI: 10.3905/jod.2012.19.4.070

Citation Manager Formats

  • BibTeX
  • Bookends
  • EasyBib
  • EndNote (tagged)
  • EndNote 8 (xml)
  • Medlars
  • Mendeley
  • Papers
  • RefWorks Tagged
  • Ref Manager
  • RIS
  • Zotero
Save To My Folders
Share
Exchange Rate Market Expectations and Central Bank Policy: The Case of the Mexican Peso/U.S. Dollar from 2005–2009
Gustavo Lesser Abarca, Guillermo Benavides, José Gonzalo Rangel
The Journal of Derivatives May 2012, 19 (4) 70-90; DOI: 10.3905/jod.2012.19.4.070
del.icio.us logo Digg logo Reddit logo Twitter logo Facebook logo Google logo LinkedIn logo Mendeley logo
Tweet Widget Facebook Like LinkedIn logo

Jump to section

  • Article
    • Abstract
    • LITERATURE REVIEW AND METHODOLOGY
    • DATA
    • EXCHANGE RATE AND INTEREST RATE MONETARY POLICY EVENTS
    • SUMMARY AND CONCLUSIONS
    • APPENDIX
    • ENDNOTES
    • REFERENCES
  • Info & Metrics
  • PDF (Subscribers Only)
  • PDF (Subscribers Only)

Similar Articles

Cited By...

  • No citing articles found.
  • Google Scholar
LONDON
One London Wall, London, EC2Y 5EA
United Kingdom
+44 207 139 1600
 
NEW YORK
41 Madison Avenue, New York, NY 10010
USA
+1 646 931 9045
pm-research@pageantmedia.com
 

Stay Connected

  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

MORE FROM PMR

  • Home
  • Awards
  • Investment Guides
  • Videos
  • About PMR

INFORMATION FOR

  • Academics
  • Agents
  • Authors
  • Content Usage Terms

GET INVOLVED

  • Advertise
  • Publish
  • Article Licensing
  • Contact Us
  • Subscribe Now
  • Log In
  • Update your profile
  • Give us your feedback

© 2022 Pageant Media Ltd | All Rights Reserved | ISSN: 1074-1240 | E-ISSN: 2168-8524

  • Site Map
  • Terms & Conditions
  • Privacy Policy
  • Cookies