Where Would the EUR/CHF Exchange Rate Be Without the SNB's Minimum Exchange Rate Policy?
Journal of Futures Markets Vol. 35 No. 12 (2015), 1103-1116.
20 Pages Posted: 17 Dec 2013 Last revised: 3 Dec 2016
Date Written: October 30, 2014
Since its announcement made on Sept. 6, 2011, the Swiss National Bank (SNB) has been pursuing the goal of a minimum EUR/CHF exchange rate of 1.20, promising to intervene on currency markets to prevent the exchange rate from falling below this level. We use a compound option pricing approach to estimate the latent exchange rate that would prevail in the absence of the SNB’s interventions, together with the market’s confidence in the SNB’s commitment to this policy.
Keywords: exchange rate options, latent exchange rate
JEL Classification: G13, F31, E58
Suggested Citation: Suggested Citation