Do the central bank actions reduce interest rate volatility?
Autor: | Jaqueline Terra Moura Marins, Jose Vicente |
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Rok vydání: | 2017 |
Předmět: |
Economics and Econometrics
050208 finance Financial economics media_common.quotation_subject 05 social sciences Interest rate option Implied volatility Volatility risk premium Interest rate Volatility swap 0502 economics and business Econometrics Volatility smile Economics 050207 economics Volatility (finance) Rendleman–Bartter model media_common |
Zdroj: | Economic Modelling. 65:129-137 |
ISSN: | 0264-9993 |
DOI: | 10.1016/j.econmod.2017.05.016 |
Popis: | This paper investigates how Central Bank of Brazil (CBB) actions influence market uncertainty. We consider two kinds of actions: the monetary policy decision about the interest rate target and the pure communication event of this decision published one week later. Unlike related papers, we measure the market uncertainty by the implied volatility extracted from interest rate options. Implied volatility is more suitable than physical volatility to assess economic effects since it encompass market beliefs adjusted by risk. We use an event study approach to evaluate the impact of CBB actions. The results show that both the decisions about the target rate and the communication event reduce the interest rate volatility. |
Databáze: | OpenAIRE |
Externí odkaz: |
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