Arco Wagemakers'  Instablog

A study called “The international role of the euro” published by the ECB just came out. The study showed that the currency preferences of the markets are quite stable and only in a limited way influenced by changes in overall financial activity, caused by the global crisis. This is in line with earlier conclusions that the international role of currencies tends to be relatively stable over time. It is however clear that the role of the euro is increasing. In markets that were tracked, like international debt markets, foreign exchange trading and global foreign exchange reserve holdings, the share of the euro increased from one to several percentage points.

The possibilities investors have with options are almost endless. Almost every view on the markets can be translated in an options strategy where call-options and put-options can be combined in various ways, and the options can be both purchased or sold. Many strategies have wonderful names like butterflies, condors, straddles and strangles, and are extensively described in books and articles. It is however less well known that options can be utilized as an instrument to generate income independently from any movement in underlying rates. The option transforms in a kind of interest instrument, where the investor can decide if he want to be on the paying or receiving end of the strategy. The strategy that I will describe here is essentially the equivalent of a zero coupon bond.