We consider the problem of a Central Bank that has some exchange rate goals. We compare "direct" Intervention through sale/purchase of reserves in the currency market with an alternative strategy of intervention with options. The intervention affects the currency markets because as a result of...

We develop a model of exchange rate determination for a small open economy under a target zone regime. The driving force of the model is an exogenous stochastic capital flow that is invested in a domestic securities market. Equilibrium exchange rates are the result of equilibrium in both the...

We examine the extent to which an investor's preferences and beliefs are uniquely determined from knowledge of the equilibrium prices and of his/her consumption strategy. More precisely, we assume that the investor's preferences admit an expected utility representation, but with subjective...

We postulate that the growing participation of institutional investors in capital markets along with their particular objective function might help to explain the home equity bias puzzle. We model an institutional investor as a risk averse investor that has access to international financial...