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A Quantitative Mirror on the Euribor Market Using Implied Probability Density Functions

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  • Josep Maria Puigvert-Gutiérrez

    ()
    (European Central Bank, Germany)

  • Rupert de Vincent-Humphreys

    (Bank of England, London, U.K.)

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    Abstract

    This paper presents a set of probability density functions for EURIBOR outturns in three months’ time, estimated from the prices of options on EURIBOR futures. It is the first official and freely available dataset to span the complete history of EURIBOR futures options, thus comprising over ten years of daily data, from 13 January 1999 onwards. Time series of the statistical moments of these option-implied probability density functions are documented until April 2010. Particular attention is given to how these probability density functions, and their associated summary statistics, reacted to the unfolding financial crisis between 2007 and 2009. The latter shows how option-implied probability density functions can be used as an uncertainty measure for monetary policy and financial stability analysis purposes.

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    Bibliographic Info

    Article provided by Eurasia Business and Economics Society in its journal Eurasian Economic Review.

    Volume (Year): 2 (2012)
    Issue (Month): 1 (Spring)
    Pages: 1-31

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    Handle: RePEc:ebz:eerjrn:v:2:y:2012:i:1:p:1-31

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    Related research

    Keywords: Financial Market; Probability Density Functions; Options; Financial Crisis;

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    Cited by:
    1. Vergote, Olivier & Puigvert Gutiérrez, Josep Maria, 2012. "Interest rate expectations and uncertainty during ECB Governing Council days: Evidence from intraday implied densities of 3-month EURIBOR," Journal of Banking & Finance, Elsevier, vol. 36(10), pages 2804-2823.

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