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Macroeconomic announcements and implied volatilities in swaption markets

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Author Info
Fabio Fornari

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Abstract

Some of the sharpest movements in the major swap markets take place during days of US economic data releases. These yield movements induce spikes in volatilities during those days. Swaption prices adjust to reflect the spikes=the volatilities implied by these prices tend to fall once the volatility spike induced by an announcement has passed. For a given type of announcement, the decline in implied volatility is consistent with the average size of the spike in realised volatilities.

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Publisher Info
Article provided by Bank for International Settlements in its journal BIS Quarterly Review.

Volume (Year): (2004)
Issue (Month): (September)
Pages:
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Handle: RePEc:bis:bisqtr:0409h

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Find related papers by JEL classification:
G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies

Cited by:
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  1. Claudio Loderer & Marc-André Mittermayer, 2006. "America and the Swiss Stock Exchange: An Intraday Analysis," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 127(I), pages 79-114, March. [Downloadable!]
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