Krugman (1991)'s target zone model has become the reference of a large part of this literature. Despite its simplicity and elegance, empirical evidence has been lacking. Deriving from Krugman's model analytical expressions for the conditional volatility and density distribution close to the...

We study the performance of the euro/Swiss franc exchange rate in the extraordinary period from September 6, 2011 and January 15, 2015 when the Swiss National Bank enforced a minimum exchange rate of 1.20 Swiss francs per euro. Within the general framework built on geometric Brownian motions...

Currency target zones have been under scrutiny for the past three decades, which led to the development of two broad classes of quantitative models: Phenomenological ones that explicitly take into consideration the market's perception of the bounded exchange rate, and more mechanical ones that...

A new way of modeling the dynamics of an exchange rate target zone is presented. In the presence of a single upper (resp. lower) target boundary, the exchange rate is precisely represented as the sum of a free float and a short (resp. long) position in a call (resp. put) option with strike price...