This paper is a selective survey of new or recent methods to extract information about market expectations from asset prices for monetary policy purposes. Traditionally, interest rates and forward exchange rates have been used to extract expected means of future interest rates, exchange rates...

This paper is an attempt to explain devaluation expectations in the ERM with macroeconomic fundamentals. Two different measures of devaluation expectations are used; expectations estimated using the drift-adjustment method of Bertola and Svensson [1993] and the directly observable interest rate...

This paper analyzes how bond option prices are affected by different types of monetary policy. Analytical results from a general equilibrium model with sticky wages show that employment or output targeting typically give lower bond option prices than inflation targeting.

The purpose of this essay is to give an overview of some recent workconcerning structural properties of the evolution of the forward rate curve in an arbitrage free bond market. The main problems to be discussed are as follows. <p> <p> 1. When is a given forward rate model consistent with a given...</p></p>

The British pound left the ERM on 16 September 1992 after a period of turbulence. UK monetary policy soon shifted to lower short interest rates and an inflation target was announced. This paper uses daily option prices to estimate how the market's probability distribution of the future...

We investigate the term structure for the case when interest rates are allowed to be driven by a general marked point process as well as by a Wiener process. Developing a theory which allows for measure-valued trading portfolios we study existence and uniqueness of a martingale measure, as well...

We consider interest rate models where the forward rates are allowed to be driven by a multidimensional Wiener process as well as by a marked point process. Assuming a deterministic volatility structure, and using ideas from systems and control theory, we investigate when the input-output map...