The paper contributes to the stochastic volatility literature by developing simulation schemes for the conditional distributions of the price of long term bonds and their variability based on non-standard distributional assumptions and volatility concepts; it illustrates the potential value of the information contained in the prices of options on long and short term lira interest rate futures for the conduct of monetary policy in Italy, at times when significant regime shifts have occured.
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Paper provided by Banca Italia - Servizio di Studi in its series Papers with number
339.
Find related papers by JEL classification: C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - General C60 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - General G12 - Financial Economics - - General Financial Markets - - - Asset Pricing E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates
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