Insurance Value of International Reserves; An Option Pricing Approach

Preprint
Publisher Website
Google Scholar
  • 1 January 2004
    • preprint
      • Published in RePEc
Abstract
A quantitative framework is developed to bring forward the insurance motive of holding international reserves. The insurance value of reserves is quantified as the market price of an equivalent option that provides the same insurance coverage as the reserves. This quantitative framework is applied to calculating the cost of a regional insurance arrangement (e.g., an Asian Monetary Fund) and to analyzing one leg of an optimal reserve-holding decision.

This publication has 0 references indexed in Scilit: