IDEAS home Printed from https://ideas.repec.org/p/chf/rpseri/rp1323.html
   My bibliography  Save this paper

Dynamics of Interest Rate Swap and Equity Volatilities

Author

Listed:
  • Antonio Mele

    (USI Università della Svizzera italiana; Swiss Finance Institute; Centre for Economic Policy Research (CEPR))

  • Yoshiki Obayashi

    (Applied Academics LLC)

  • Catherine Shalen

    (Chicago Board Options Exchange (CBOE))

Abstract

While CBOE's VIX index is widely acknowledged as a broad-based investor “fear gauge” for its strong inverse relationship with major equity indexes, one cannot necessarily expect it to translate to the level of future turbulence or investor risk aversion in fixed-income markets. Indeed, expected volatilities in equity and interest rate markets as measured respectively by CBOE's VIX and their newly-launched swap rate volatility index -- SRVX -- exhibit significantly distinct behaviors. The two indexes react to different events and risk factors, thereby providing investors with complementary diversification, hedging, and risk-taking tools.

Suggested Citation

  • Antonio Mele & Yoshiki Obayashi & Catherine Shalen, 2013. "Dynamics of Interest Rate Swap and Equity Volatilities," Swiss Finance Institute Research Paper Series 13-23, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp1323
    as

    Download full text from publisher

    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2255584
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Interest Rate Volatility; Interest Rate Variance Swaps; Model-Free Pricing; VIX Index; SRVX Index; Basis Point Variance; Variance Risk-Premiums;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:chf:rpseri:rp1323. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ridima Mittal (email available below). General contact details of provider: https://edirc.repec.org/data/fameech.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.