Author: Robert R. BlissPublisher:
ISBN:
Category : Callable securities
Languages : en
Pages : 72
Book Description
The Implied Volatility of U.S. Interest Rates
Author: Robert R. BlissPublisher:
ISBN:
Category : Callable securities
Languages : en
Pages : 72
Book Description
The Implied Volatility of U.S. Interest Rates
Author: Robert R. BlissPublisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
The prices for callable U.S. treasury securities provide the sole source of evidence concerning the implied volatility of interest rates over the extended 1926-1994 period. This paper uses the prices of callable as well as non-callable Treasury instruments to estimate implied interest rate volatilities for the past sixty years, and, for the more recent 1989-1994 period, the cross-sectional term structures of implied interest rate volatility. We utilize these estimates to perform cross-sectional richness/cheapness analysis across callable treasuries. Inter alia, we develop the optimal call policy for deferred quot;Bermudaquot;-style options for which prior notification of intent to call is required by introducing the concept of quot;threshold volatilityquot; to measure the point when the time value of the embedded call option has been eroded to zero. This concept permits appropriate callable-bond valuation. Lastly, we document the optimality of the treasury's past call policy for U.S. government obligations.
Using Implied Volatility to Measure Uncertainty About Interest Rates
Author: Publisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
Cf.: http://dx.doi.org/10.3886/ICPSR01316.v1.
Economic Information and Market Volatility Expectations
Author: Ruthann Kimberly MelbournePublisher:
ISBN:
Category :
Languages : en
Pages : 178
Book Description
Implied Volatility of Interest Rate Options
Author: Charlotte ChristiansenPublisher:
ISBN:
Category : Finansielle instrumenter
Languages : en
Pages : 36
Book Description
Stochastic Interest Rates
Author: Daragh McInerneyPublisher: Cambridge University Press
ISBN: 1107002575
Category : Business & Economics
Languages : en
Pages : 171
Book Description
Designed for Master's students, this practical text strikes the right balance between mathematical rigour and real-world application.
Comparing U.S. and European Market Volatility Responses to Interest Rate Policy Announcements
Author: Kevin KriegerPublisher:
ISBN:
Category :
Languages : en
Pages : 29
Book Description
We examine the response of U.S. (VIX) and German (VDAX) implied volatility indices to the announcement of interest rate policy decisions by the Federal Open Market Committee (FOMC) and the European Central Bank (ECB). We present new findings that indicate that VDAX declines on FOMC meeting days, a result that holds for nearly all announcement types. VDAX declines on ECB meeting days in which there is a negative rate surprise or no surprise and is unrelated to ECB meeting days otherwise. VIX is unrelated to ECB meeting days. We confirm prior findings that VIX declines on FOMC meetings days regardless of the content of the meeting. Taken collectively, our results indicate a prominent position for the FOMC in determining uncertainty levels both domestically and abroad relative to a conditional domestic relation between uncertainty levels and the ECB.
Interest Rate Volatility and Expectations about the Business Cycle
Author: María Isabel Martínez SernaPublisher:
ISBN:
Category :
Languages : en
Pages : 26
Book Description
One explanation for the usefulness of financial variables as tools for economic forecasting is that they embody the expectations of economic agents about the future state of the economy. In this paper, we test whether interest rate volatility contains information on the expectations of agents which are directly measured by confidence indicators. For the sake of robustness, we use several different expectation indicators for the two countries we analyze, the US and Germany: the Conference Board Consumer Confidence Index, the Philadelphia Fed's Business Outlook Survey and the Purchase Management Index for the US and the Economic Sentiment Indicator, the IFO Business Climate and ZEW Indicator of Economic Sentiment for Germany. We propose using a forward-looking measure of volatility: the implied volatility of one year cap options. We find that implied volatility adds explanatory power to the yield spread and to changes in the short rate, which are typical predictors of the business cycle, and outperforms realized volatility.
Federal Reserve Transparency and Financial Market Forecasts of Short-term Interest Rates
Author: Eric T. SwansonPublisher:
ISBN:
Category : Interest rates
Languages : en
Pages : 56
Book Description
On the Relationship between Expected Returns and Implied Volatility of Interest Rate-Dependent Securities
Author: Ehud I. RonnPublisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
In this paper, we examine the relationship between expected excess returns and volatilities implied by options on interest rate-dependent securities, and estimate the market price of interest rate risk. If the short-term riskless rate of interest follows a one-factor lto process, then the instantaneous expected excess return on any derivative security, whose payoff is a function only of the riskless rate and time, is proportional to the instantaneous standard deviation of returns on that security. Therefore, interest rate-dependent securities with higher volatility should, on average, earn proportionally higher excess returns. We test this hypothesis using price data on Coupon-STRIPS and implied volatility data from futures options on various U.S. Treasury securities and Eurodollars. We also estimate the ratio of the expected excess returns to the volatility of returns--denoted the market price of interest rate risk--using several estimation techniques. We find that there is, indeed, a positive relationship between expected excess returns and volatility, and that interest rate risk is rewarded in the marketplace. Implied volatility may, therefore, be used as a weak market-timing signal.