Options embedded in ECB Targeted refinancing operations

monetary policy
permanent working paper
Banque de France Working Paper

Jean-Paul Renne


October 1, 2014

In June 2014, the European Central Bank (ECB) announced the implementation of new refinancing operations aimed at supporting bank lending to the non-financial private sector. This paper exhibits and prices options embedded in these Targeted Longer-Term Refinancing Operations. In particular, it shows how these options participate to the incentive mechanisms at play in these operations. Quantitative results point to substantial gains – for participating banks – attached to the satisfaction of lending conditions defined by the scheme.

Link to paper