Template-type: ReDIF-Paper 1.0
Author-Name: Nikola Mirkov
Author-Name-First: Nikola
Author-Name-Last: Mirkov
Author-Person: pmi597
Author-Name: Igor Pozdeev
Author-Name-First: Igor
Author-Name-Last: Pozdeev
Author-Name: Paul Söderlind
Author-Name-First: Paul
Author-Name-Last: Söderlind
Author-Person: pso16
Title: Toward Removal of the Swiss Franc Cap: Market Expectations and Verbal Interventions
Abstract: We ask whether the markets expected the Swiss National Bank (SNB) to discontinue the 1.20 cap on the Swiss franc against the euro in January 2015. In the runup to the SNB announcement, neither options on the euro/Swiss franc nor FX liquidity indicated a significant shift in market expectations. Furthermore, we find that the SNB's verbal interventions during the period of cap enforcement increased the credibility of the cap by reducing the uncertainty of future euro/Swiss franc rate. We conclude that the markets did not anticipate the discontinuation of the policy.
Length: 33 pages
Creation-Date: 2016
Contact-Email: forschung@snb.ch
File-URL: https://www.snb.ch/en/publications/research/working-papers/2016/working_paper_2016_10
File-Format: text/html
Number: 2016-10
Classification-JEL: E58, E44, G12
Keywords: Swiss franc, implied volatilities, market expectations
Handle: RePEc:snb:snbwpa:2016-10