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The Sources of Volatility Transmission in the Euro Area Money Market: From Longer Maturities to the Overnight?

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Author Info

  • Zagaglia, Paolo

    ()
    (Dept. of Economics, Stockholm University)

Abstract

This note investigates the transmission of volatility from longer maturities to the overnight segment of the Euro area money market. I use non-parametric estimates of the daily variance of swap rates to test for block exogeneity with respect to the overnight. The results suggest that there exists transmission of volatility shocks from the 1-year swap rate to the overnight market. The reform of the operational framework of March 2004 has improved the segmentation of the market, as it has insulated the overnight segment from spillovers in volatility stemming from swap rates up to 6 months of maturity.

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File URL: http://www2.ne.su.se/paper/wp08_05.pdf
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Bibliographic Info

Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2008:5.

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Length: 9 pages
Date of creation: 22 May 2008
Date of revision:
Handle: RePEc:hhs:sunrpe:2008_0005

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Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden
Phone: +46 8 16 20 00
Fax: +46 8 16 14 25
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Web page: http://www.ne.su.se/
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Keywords: Money Market; High-Frequency Data; Granger Causality;

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Cited by:
  1. Hernandis, Lucía & Torró, Hipòlit, 2013. "The information content of Eonia swap rates before and during the financial crisis," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5316-5328.

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