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Working Paper

Option Prices, Exchange Market Intervention, and the Higher Moment Expectations Channel: A User’s Guide

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This paper investigates how market structure affects efficiency and several dimensions of liquidity in an asset market. To this end, we generalize the search-theoretic model of financial intermediation of Darrell Duffie et al. (2005) to allow for entry of dealers and unrestricted asset holdings.
12.04.2006WP 06-18DOI 10.26509/frbc-wp-200618
Keywords exchange rate intervention, monetary policy, risk-neutral probability density function
JEL Classification Codes F3, G15
Suggested Citation

Galati, Gabriele, Owen F. Humpage, Patrick Higgins, and William Melick. 2006. “Option Prices, Exchange Market Intervention, and the Higher Moment Expectations Channel: A User’s Guide” Federal Reserve Bank of Cleveland, Working Paper No. 06-18. https://doi.org/10.26509/frbc-wp-200618