Czech Koruna and Polish Zloty Currency Options: Information Content and Eu-Accession Implications

37 Pages Posted: 1 Feb 2006

See all articles by Armando Morales Bueno

Armando Morales Bueno

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

Date Written: May 2000

Abstract

Currency option implied volatility predicts more efficiently exchange rate volatility for the Polish zloty relative to the Czech koruna, reflecting differences in the frequency of central bank intervention in the foreign exchange market. A GARCH model shows a positive impact of the introduction of the Euro on exchange rate volatility for the Polish zloty (negative for the Czech koruna), related to its larger exposure to external shocks. For countries in transition to Euro integration, the implied trade-off between isolation from shocks and efficient signaling must be addressed based on the risk of exchange rate misalignment at the time of monetary conversion.

Keywords: Exchange rate, volatility, Eastern Europe, Euro, options, integration

JEL Classification: C20, F31, F36, G13

Suggested Citation

Morales, R. Armando, Czech Koruna and Polish Zloty Currency Options: Information Content and Eu-Accession Implications (May 2000). IMF Working Paper No. 00/91, Available at SSRN: https://ssrn.com/abstract=879634

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
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202-623-8476 (Phone)

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