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A quantitative mirror on the Euribor market using implied probability density functions

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  • de Vincent-Humphreys, Rupert
  • Puigvert Gutiérrez, Josep Maria
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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. In doing so, it shows how option-implied probability density functions could be used to contribute to monetary policy and financial stability analysis. JEL Classification: C13, C14, G12, G13

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    Bibliographic Info

    Paper provided by European Central Bank in its series Working Paper Series with number 1281.

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    Date of creation: Dec 2010
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    Handle: RePEc:ecb:ecbwps:20101281

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    Keywords: financial; financial market; options; probability density functions;

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    1. Coutant, S. & Jondeau, E. & Rockinger, M., 1998. "Reading Interest Rate and Bond Futures Options' Smiles: How PIBOR and National Operators Appreciated the 1997 French Snap Election," Working papers 54, Banque de France.
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