What FX Options Can Tell Monetary Policy - The Case of Israel

4-8/02/2002


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Content

Seminar "Derivatives: Opportunities and Challenges for Central Banks"

Figure 1: Inflation Expectations 12 Months Ahead

Figure 2: BOI Fx Options - 3 Months to Maturity Pure at the Money

Figure 3: Exchange Rate and the Probability of a Depreciation of at Least 10 Percent in the 6 Months Ahead

PPT

Figure 5: Exchange Rate, Historical Volatility and Implied Volatility

Figure 6: Implied Volatility Smiles of Call Options

Figure 7: Implied Volatility Smiles of Call Options

Figure 7a: Density and Cumulative Probability Function* of the Exchange Rate: Extracted from Option Prices with Maturity Date: 27-Feb-02

Figure 7b: Density and Cumulative Probability Function* of the Exchange Rate: Extracted from Option Prices with Maturity Date: 27-Feb-02

Figure 8: The Official and the Effective Exchange Band Rate, and the Exchange Rate (1/2/96 16/1/02)

Table 1: NIS/Dollar Options Sold Currently - Real Profit and Loss Report (NIS million)

Table 2: Tests of the Sustainability of Inflation Targeting With an Effective FX Band*

Author: Dr. Meir Sokoler

Homepage: http://www.bankisrael.gov.il