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Title:Extracting implicit density functions from short term interest rate options PDF Logo
Authors:Nielsen, Hannah
Issue Date:2001
Series/Report no.:Discussion Papers, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes 2001,47
Abstract:Using option prices the expectations of the market participants concerning the underlying asset can be extracted as well as the uncertainty surrounding these expectations. In this paper a mixture of lognormal density functions will be assumed to analyze options on three-month Euribor futures for the period between August and November 2000. During this period the ECB raised the interest rates and intervened in the exchange markets, both actions that could have an effect on the expectations of a short term interest rate. As will be shown the expected mean as well as the higher moments of the distribution show quite large movements, which can in part be associated directly with these interventions.
Subjects:monetary policy
implicit density function
interest rate options
market expectations
JEL:G13
E44
E52
C13
Persistent Identifier of the first edition:urn:nbn:de:kobv:11-10049957
Document Type:Working Paper
Appears in Collections:Discussion Papers, SFB 373, HU Berlin

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