Czech Koruna and Polish Zloty: Spot and Currency Option Volatility Patterns

Morales Bueno, Armando

Abstract

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Czech Koruna and Polish Zloty: Spot and Currency Option Volatility Patterns

Armando Morales Bueno

International Monetary Fund (IMF) - Monetary and Exchange Affairs Department

August 2001

IMF Working Paper No. 01/120

Abstract:
Exchange rate flexibility has facilitated an impressively fast insertion of the Czech koruna and the Polish zloty into the global currency market. However, exchange rate volatility patterns differ: Lower volatility is observed for the koruna against the euro relative to the U.S. dollar, while the opposite is true for the zloty, apparently related to earlier financial integration of the Czech Republic with Europe and early dollarization in Poland as a result of initial higher inflation rates. By contrast, the currency options market shows enhanced information content of both currencies against the euro reflected in the behavior of their implied volatility.

Number of Pages in PDF File: 30

Keywords: exchange rate, volatility, Eastern Europe, options

JEL Classification: C20, F31, F36, Gl3

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Date posted: February 1, 2006

Suggested Citation

Morales Bueno, Armando, Czech Koruna and Polish Zloty: Spot and Currency Option Volatility Patterns (August 2001). IMF Working Paper, Vol. , pp. 1-30, 2001. Available at SSRN: http://ssrn.com/abstract=879871

Contact Information

R. Armando Morales (Contact Author)

International Monetary Fund (IMF) - Monetary and Exchange Affairs Department ( email )

700 19th Street NW
Room 6-548
Washington, DC 20431
United States
202-623-8476 (Phone)