Recoverıng rısk-neutral densıtıes from exchange rate optıons: Evıdence ın turkey
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Date
2009
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İnönü Üniversitesi İktisadi ve İdari Bilimler Fakültesi
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info:eu-repo/semantics/openAccess
Abstract
This paper uses over-the-counter currency options data to investigate market expectations on Turkish Lira-U.S. Dollar exchange rate. We extract option implied density functions to examine the evolution of market sentiment over the possible values of future exhange rates. Uncertainty is well measured by option-implied probabilities. Estimated densities for selected days point out an increase in uncertainty in foreign exchange market during financial turbulence periods. We make inferences about the effectiveness of policy measures and see how the market perception changed throughout the crisis. We uncover the effectiveness of policy measures by observing shrinking densities and confidence bands.
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Keywords
Options, Risk neutral density, Market expectations
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Citation
Aydın, Hİ. Değerli, A. Özlü, P. (2009). Recoverıng rısk-neutral densıtıes from exchange rate optıons: Evıdence ın turkey. 1-19 ss.
