This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Extracting Market Expectations from Option Prices: Case Studies in Japanese Option Markets

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Nakamura, Hisashi (Bank of Japan)
Shiratsuka, Shigenori (Bank of Japan and Federal Reserve Bank of Chicago)

Additional information is available for the following registered author(s):

Abstract

This paper focuses on the recently developing financial derivatives markets, and examines the usefulness of option prices as an information variable for monetary policy implementation. A set of option prices provides us with information on the entire probability distribution of the future values of underlying assets. Such information enables us to examine the development of market expectations. The paper estimates a time series of implied probability distributions from daily option prices on stock price index and long-term government bond futures in Japan. The estimation is done for a sample of daily closing prices for the following three periods: (1) the period of a collapsing "bubble" in the stock market in 1989-90; (2) the period of serious stock market slump in 1992-94; and (3) the period of increasing anxiety in the market about a possible deflationary spiral in 1995.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.imes.boj.or.jp/japanese/all99/me17-1-1.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Article provided by Institute for Monetary and Economic Studies, Bank of Japan in its journal Monetary and Economic Studies.

Volume (Year): 17 (1999)
Issue (Month): 1 (May)
Pages: 1-43
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:ime:imemes:v:17:y:1999:i:1:p:1-43

Contact details of provider:
Postal: 2-1-1 Nihonbashi, Hongoku-cho, Chuo-ku, Tokyo 103
Phone: +81-3-3279-111
Fax: +81-3-3510-1265
Email:
Web page: http://www.imes.boj.or.jp/
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Kinken) The email address of this maintainer does not seem to be valid anymore. Please ask Kinken to update the entry or send us the correct address..

Related research
Keywords:

Other versions of this item:

Find related papers by JEL classification:
G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Malz, Allan M., 1996. "Using option prices to estimate realignment probabilities in the European Monetary System: the case of sterling-mark," Journal of International Money and Finance, Elsevier, vol. 15(5), pages 717-748, October. [Downloadable!] (restricted)
  2. Bernanke, Ben S & Woodford, Michael, 1997. "Inflation Forecasts and Monetary Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(4), pages 653-84, November.
    Other versions:
  3. Soderlind, Paul & Svensson, Lars, 1997. "New techniques to extract market expectations from financial instruments," Journal of Monetary Economics, Elsevier, vol. 40(2), pages 383-429, October. [Downloadable!] (restricted)
    Other versions:
  4. Melick, William R. & Thomas, Charles P., 1997. "Recovering an Asset's Implied PDF from Option Prices: An Application to Crude Oil during the Gulf Crisis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 32(01), pages 91-115, March. [Downloadable!]
  5. Breeden, Douglas T & Litzenberger, Robert H, 1978. "Prices of State-contingent Claims Implicit in Option Prices," Journal of Business, University of Chicago Press, vol. 51(4), pages 621-51, October. [Downloadable!] (restricted)
  6. Bates, David S, 1991. " The Crash of '87: Was It Expected? The Evidence from Options Markets," Journal of Finance, American Finance Association, vol. 46(3), pages 1009-44, July. [Downloadable!] (restricted)
  7. Michael Woodford, 1994. "Nonstandard Indicators for Monetary Policy: Can Their Usefulness Be Judged from Forecasting Regressions?," NBER Chapters, in: Monetary Policy, pages 95-115 National Bureau of Economic Research, Inc. [Downloadable!]
  8. Cox, John C. & Ross, Stephen A., 1976. "The valuation of options for alternative stochastic processes," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 145-166. [Downloadable!] (restricted)
  9. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Martin Mandler, 2002. "Extracting Market Expectations from Option Prices: Two Case Studies in Market Perceptions of the ECB's Monetary Policy 1999/2000," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 138(II), pages 165-189, June. [Downloadable!]
  2. Marie Brière, 2006. "Market Reactions to Central Bank Communication Policies : Reading Interest Rate Options Smiles," Working Papers CEB 06-009.RS, Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB). [Downloadable!]
  3. Martin Scheicher & Ernst Glatzer, 2003. "Modelling the implied probability of stock market movements," Working Paper Series 212, European Central Bank. [Downloadable!]
  4. H. Nielsen, . "Extracting implicit density functions from short term interest rate options," Sonderforschungsbereich 373 2001-47, Humboldt Universitaet Berlin.
Statistics
Access and download statistics

Did you know? IDEAS indexes over 800000 items of research in Economics alone.

This page was last updated on 2009-11-1.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.