TEL  Vol.3 No.3 , June 2013
An Extended Model of Currency Options Applicable as Policy Tool for Central Banks with Inflation Targeting and Dollarized Economies
ABSTRACT

The purpose of this paper is to provide a new set of tools for policy makers at central banks. Based on the Garman-Kohlhagen [1] formula for currency options, this research extends it with the Taylor-rule expression used for inflation targeting, thus obtaining the corresponding Call and Put options and the first and higher-degree partial derivatives known as “Greeks” for key variables such as the policy target domestic interest rate and the output gap.


Cite this paper
L. Arizmendi, "An Extended Model of Currency Options Applicable as Policy Tool for Central Banks with Inflation Targeting and Dollarized Economies," Theoretical Economics Letters, Vol. 3 No. 3, 2013, pp. 164-167. doi: 10.4236/tel.2013.33027.
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