Most of the recent research about the behavior of exchange rates in a target zone regime is based in 1991 Krugman's model. The presence of limits makes an asset to behave as a combined price of options, and the goal of this research is to use this approach and compare its results to those obtained by the classical model. These results are different in some aspects and similar in others, providing some insights to a better comprehension of the subject.
Target zones; exchange rates; options; derivatives