C61 - Optimization Techniques; Programming Models; Dynamic AnalysisReturn

The fundamental equilibrium of the FX rate was significantly impacted by interventions of the Czech national bank. This article focuses on intervention influence on option valuation EURCZK currency pair as an underlying asset in years 2013-2017. We describe and quantify the prices of aforementioned FX options applying different approaches for historical and implied volatility estimation. Applying the implied volatility, we calibrate the jump diffusion model which provides the description of magnitude and direction of jumps in the underlying asset price. Mainly to ensure better comparability of the data for volatility and model estimation, both pre-intervention and post-intervention data were used. Estimated parameters show, that markets in 2013 did not trust the Czech economy and expected jump depreciation of the Czech crown. In 2014 and 2015 markets expected no major deviations from the exchange rate commitment and, therefore, only depreciation was expected. From 2016 onwards markets adjusted expectations in line with the exit from exchange rate commitment and hence expected appreciation. Due to high volumes of speculative capital and large short sales of the Czech crown markets again expected depreciation.

This paper strives to address the issue of distribution costs budgeting, encountered by commercial banks whose business plans presume the sale of saving accounts using third-party distribution networks. A rather intricate problem arises, jointly requiring the design of a commercially viable commission schedule and estimating its impacts on the bank's financial results, where traditional methods fail. An annotated case study illustrates an expedient and practical solution using statistical simulation.