Macroeconomic announcements and implied volatilities in swaption markets
Some of the sharpest movements in the major swap markets take place during days of US economic data releases. These yield movements induce spikes in volatilities during those days. Swaption prices adjust to reflect the spikes=the volatilities implied by these prices tend to fall once the volatility spike induced by an announcement has passed. For a given type of announcement, the decline in implied volatility is consistent with the average size of the spike in realised volatilities.
Volume (Year): (2004)
Issue (Month): (September)
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- Ederington, Louis H. & Lee, Jae Ha, 1996. "The Creation and Resolution of Market Uncertainty: The Impact of Information Releases on Implied Volatility," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(04), pages 513-539, December.
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9706, Federal Reserve Bank of New York.
- Toni Gravelle & Richhild Moessner, 2001. "Reactions of Canadian Interest Rates to Macroeconomic Announcements: Implications for Monetary Policy Transparency," Staff Working Papers 01-5, Bank of Canada.
- Michael Ehrmann & Marcel Fratzscher, 2003.
"Interdependence between the Euro area and the U.S.: what role for EMU?,"
Board of Governors of the Federal Reserve System (U.S.).
- Ehrmann, Michael & Fratzscher, Marcel, 2002. "Interdependence between the euro area and the US: what role for EMU?," Working Paper Series 0200, European Central Bank.
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