Legal

The Credibility Of The Link From The Perspective Of Modern Financial Theory

Free registration required

Executive Summary

Hong Kong's Linked Exchange Rate System (LERS) has been in operation for 25 years during which time many other fixed exchange rate systems have succumbed to shocks and/or speculative attacks. This fact alone suggests that the LERS is a robust system which enjoys a large measure of credibility in financial markets. This paper intends to investigate whether this is indeed the case, and whether it has been the case throughout its 25-year history. In particular the authors will use the tools of modern finance to extract information from financial-asset prices about market expectations that are related to the credibility of the LERS.

  • Format: PDF
  • Size: 617.5 KB