This paper develops a model for valuing options on a currency which is maintained within a band. The starting point of our model is the well known Krugman model for exchange-rate behavior within a target zone. Results from model runs provide insight into evidence reported by other authors of...

We examine the expected survival time of a unilateral exchange rate target zone, when constraints on monetary policy prevent the central bank from exclusively focusing on defending the target zone. Generally, the width of the target zone has a negligible effect on the expected survival time, and...

This paper develops a model for valuing options on a currency which is maintained within a band. The starting point of our model is the well known Krugman model for exchange-rate behavior within a target zone. Results from model runs provide insight into evidence reported by other authors of...