The Probability Density Function of Interest Rates Implied in the Price of Options
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.
|Date of creation:||Oct 1998|
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94-09, New York University, Leonard N. Stern School of Business, Department of Economics.
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- Fabio Fornari & Antonio Mele, 1997. "Weak convergence and distributional assumptions for a general class of nonliner arch models," Econometric Reviews, Taylor & Francis Journals, vol. 16(2), pages 205-227. Full references (including those not matched with items on IDEAS)