In this paper we estimated a volatility model for COP/US under two different samples, one containing the information before the “discretional interventions” started, and the other using the whole sample. We use a nonparametric approach to estimate the mean and “volatility smile” return functions using daily data. For the pre-interventions sample, we found a nonlinear expected return function and, surprisingly, a nonsymmetric “volatility smile”. These lack of linearity and symmetry are related to absolute returns above 1,5% and 1,0%, respectively. We also found that the “discretional interventions” did not shift the mean response function, but moved the expected returns along the line towards the required levels. In contrast, the “volatility smile” tends to increase in a non-symmetric way after accounting for “discretional interventions”. The Sep/29/2004 announcement does not seem to have had any effect on the expected conditional mean or variance functions, but the Dec/17/2004 announcement seems to be related to non-symmetric effects on the volatility smile. We concluded that the announcement of discretional intervention by the monetary authority was more efficient when time and amount were unannounced.
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
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by BANCO DE LA REPÚBLICA in its series BORRADORES DE ECONOMIA with number
002605.
Length: 26 Date of creation: 30 Jul 2005 Date of revision: Handle: RePEc:col:000094:002605
Contact details of provider:
For technical questions regarding this item, or to correct its listing, contact: (Norma Judith Paternina).
Related research
Keywords:
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.: