The Probability Density Function of Interest Rates Implied in the Price of Options
AbstractThe 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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Bibliographic InfoPaper provided by Banca Italia - Servizio di Studi in its series Papers with number 339.
Length: 47 pages
Date of creation: 1998
Date of revision:
Contact details of provider:
Postal: Banca d'Italia-Servizio Studi-Divisione Biblioteca e Pubblicazioni - Via N azionale, 91 -00184 Rome, Italy.
Web page: http://www.bancaditalia.it/
More information through EDIRC
STOCHASTIC MODELS ; STATISTICAL ANALYSIS ; INTEREST RATE ; FINANCIAL MARKET;
Other versions of this item:
- Fabio Fornari & Roberto Violi, 1998. "The Probability Density Function of Interest Rates Implied in the Price of Options," Temi di discussione (Economic working papers) 339, Bank of Italy, Economic Research and International Relations Area.
- C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
- C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
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.:
- Nelson, Daniel B., 1990. "ARCH models as diffusion approximations," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 7-38.
- Bossaerts, Peter & Hillion, Pierre, 1997.
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- Engle, Robert F. & Mustafa, Chowdhury, 1992. "Implied ARCH models from options prices," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 289-311.
- Fabio Fornari & Antonio Mele, 1997. "Weak convergence and distributional assumptions for a general class of nonliner arch models," Econometric Reviews, Taylor and Francis Journals, vol. 16(2), pages 205-227.
- Siviero, S. & Terlizzese, D. & Visco, I., 1999.
"Are Model-Based Inflation Forecasts Used in Monetary Policymaking? A Case Study,"
357, Banca Italia - Servizio di Studi.
- Stefano Siviero & Daniele Terlizzese & Ignazio Visco, 1999. "Are model-based inflation forecasts used in monetary policymaking? A case study," Temi di discussione (Economic working papers) 357, Bank of Italy, Economic Research and International Relations Area.
- 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.
- Marcello Pericoli, 2005. "Can option smiles forecast changes in interest rates? An application to the US, the UK and the euro area," Temi di discussione (Economic working papers) 545, Bank of Italy, Economic Research and International Relations Area.
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