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What Fed funds futures tell us about monetary policy uncertainty

Fontaine, Jean-Sébastien - 2016

The uncertainty around future changes to the Federal Reserve target rate varies over time. In our results, the main driver of uncertainty is a "path" factor signaling information about future policy actions, which is filtered from federal funds futures data. The uncertainty is highest when it...

Persistent link: https://www.econbiz.de/10011576374

A simple method for extracting the probability of default from American put option prices

Chang, Bo Young; Orosi, Greg - 2020 - Last updated: April 20, 2020

In this paper, we present a novel method to extract the risk-neutral probability of default of a firm from American put option prices. Building on the idea of a default corridor proposed in Carr and Wu (2011), we derive a parsimonious closed-form formula for American put option prices from which...

Persistent link: https://www.econbiz.de/10012216226

On the tail risk premium in the oil market

Ellwanger, Reinhard - 2017

This paper shows that changes in market participants' fear of rare events implied by crude oil options contribute to …

Persistent link: https://www.econbiz.de/10011778000

The "too big to fail" subsidy in Canada : some estimates

Mora, Patricia Palhau - 2018

Implicit government guarantees of banking-sector liabilities reduce market discipline by private sector stakeholders and temper the risk sensitivity of funding costs. This potentially increases the likelihood of bailouts from taxpayers, especially in the absence of effective resolution...

Persistent link: https://www.econbiz.de/10011797528

Futures markets, oil prices and the intertemporal approach to the current account

Arbatli, Elif C. (contributor) - 2008

The intertemporal approach to the current account suggests modeling movements in the current account in a forward-looking, dynamic framework. In this framework, the current account reflects consumption smoothing of agents that lend and borrow from the rest of the world in the face of transitory...

Persistent link: https://www.econbiz.de/10003790571

The equity premium and the volatility spread : the role of risk-neutral skewness

Feunou, Bruno; Fontaine, Jean-Sébastien; Tedongap, Roméo - 2009

, variance and an independent skewness parameter under both measures. The model predicts that the spread between historical and … risk-neutral volatilities is a function of the risk premium and of skewness. In fact, the equity premium is twice the ratio … of the volatility spread to skewness. We measure skewness from option prices and test these predictions. We find that …

Persistent link: https://www.econbiz.de/10003852916

The economic value of realized volatility : using high-frequency returns for option valuation

Christoffersen, Peter F.; Feunou, Bruno; Jacobs, Kris; … - 2012

Many studies have documented that daily realized volatility estimates based on intraday returns provide volatility forecasts that are superior to forecasts constructed from daily returns only. We investigate whether these forecasting improvements translate into economic value added. To do so we...

Persistent link: https://www.econbiz.de/10009627514

The financialization of food?

Bruno, Valentina G.; Buyuksahin, Bahattin; Robe, Michel A. - 2013

Commodity-equity and cross-commodity return co-movements rose dramatically after the 2008 financial crisis. This development took place following what has been dubbed the 'financialization' of commodity markets. We first document changes since 2000 in the intensity of speculative activity in...

Persistent link: https://www.econbiz.de/10010201385

CoMargin

Cruz Lopez, Jorge A.; Harris, Jeffrey H.; Hurlin, Christophe - 2013

We present CoMargin, a new methodology to estimate collateral requirements for central counterparties (CCPs) in derivatives markets. CoMargin depends on both the tail risk of a given market participant and its interdependence with other participants. Our approach internalizes market...

Persistent link: https://www.econbiz.de/10010225497

What does the convenience yield curve tell us about the crude oil market?

Alquist, Ron; Bauer, Gregory H.; Díez de los Ríos, Antonio - 2014

Using the prices of crude oil futures contracts, we construct the term structure of crude oil convenience yields out to one-year maturity. The crude oil convenience yield can be interpreted as the interest rate, denominated in barrels of oil, for borrowing a single barrel of oil, and it measures...

Persistent link: https://www.econbiz.de/10010401755