Financial Markets' Views about the Euro-Swiss Franc Floor

Urban J. Jermann

NBER Working Paper No. 21977
Issued in February 2016
NBER Program(s):Asset Pricing, International Finance and Macroeconomics

Exchange rates and option prices incorporate market participants’ views about the credibility and the effects of exchange rate targets. I present a model to determine exchange rates under policy targets that can be used to price options. The model is estimated with Euro-Swiss Franc exchange rate and options price data. In the first few months of the minimum exchange rate policy, the implied survival probability of the policy for a three month horizon was typically less than 75%. Over time, the credibility increased and this probability reached 95% in August 2014. The analysis also implies that during the second quarter of 2012, when reserve accumulation was high, the exchange rate without the policy would have been as low as about 1 Swiss franc per euro.

You may purchase this paper on-line in .pdf format from ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.


Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w21977

Users who downloaded this paper also downloaded* these:
Passari and Rey w21172 Financial Flows and the International Monetary System
Daniel and Hirshleifer w21945 Overconfident Investors, Predictable Returns, and Excessive Trading
Chabot, Ghysels, and Jagannathan w20660 Momentum Trading, Return Chasing, and Predictable Crashes
Bartlett and McCrary w21286 Dark Trading at the Midpoint: Pricing Rules, Order Flow, and High Frequency Liquidity Provision
Heutel, Moreno-Cruz, and Shayegh w21355 Solar Geoengineering, Uncertainty, and the Price of Carbon
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us