01776cas a2200241 a 4500 AALejournalIMF003247 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451859997 1018-5941 BD-DhAAL BD-DhAAL Krichene, Noureddine. Deriving Market Expectations for the Euro-Dollar Exchange Rate from Option Prices / Noureddine Krichene. Washington, D.C. : International Monetary Fund, 2004. 1 online resource (24 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Option prices provide valuable information on market expectations. This paper attempts to extract market expectations, as conveyed by an implied risk-neutral probability distribution, from option prices for the dollar-euro exchange rate. Returns' volatilities are inferred from observed and interpolated option prices. To address robustness, two distributions, one from actual data and the other from interpolated data, were computed. The main conclusion of the paper is that traders have wide-ranging expectations, and large movements in either direction would not occur as a surprise. The main implication for monetary policy is that should markets become too volatile, then intervention may be required. Mode of access: Internet IMF Working Papers; Working Paper ; No. 2004/196 Full text available on IMF http://elibrary.imf.org/view/journals/001/2004/196/001.2004.issue-196-en.xml IMF e-Library