Contributions

  • Panageas, Stavros. - Contributor
  • National Bureau of Economic Research. - Contributor

Publication

2004 - National Bureau of Economic Research, Cambridge, Mass, Massachusetts

Language

English

Word Count

6,250 words, Guess

Page Count

25 pages

Identifiers

Description

"One of the most serious problems that a central bank in an emerging market economy can face, is the sudden reversal of capital inflows. Hoarding international reserves can be used to smooth the impact of such reversals, but these reserves are seldom sufficient and always expensive to hold. In this paper we argue that adding richer hedging instruments to the portfolios held by central banks can significantly improve the efficiency of the anti-sudden stop mechanism. We illustrate this point with a simple quantitative hedging model, where optimally used options and futures on the S&P100's implied volatility index (VIX), increases the expected reserves available during sudden stops by as much as 40 percent"--National Bureau of Economic Research web site.

Subjects

Topics

Bank reservesMathematical modelsBank reserves -- Mathematical models

Series Statement

  • NBER working paper series -- no. 10786.
  • Working paper series (National Bureau of Economic Research) -- working paper no. 10786.

Links

Other Editions

  • Contingent reserves management: an applied frameworkNational Bureau of Economic Research2004-01-01

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