Arbeitspapier

Measuring uncertainty in monetary policy using implied volatility and realized volatility

We measure uncertainty surrounding the central bank's future policy rates using implied volatility computed from interest rate option prices and realized volatility computed from intraday prices of interest rate futures. Both volatility measures show that uncertainty decreased following the most important policy actions taken by the Bank of Canada as a response to the financial crisis of 2007 - 08, such as the conditional commitment of 2009 - 10, the unscheduled cut in the target rate coordinated with other major central banks, and the introduction of term purchase and resale agreements. We also find that, on average, uncertainty decreases following the Bank of Canada's policy rate announcements. Furthermore, our measures of policy rate uncertainty improve the estimation of policy rate expectations from overnight index swap (OIS) rates by predicting the risk premium in the OIS market.

Sprache
Englisch

Erschienen in
Series: Bank of Canada Working Paper ; No. 2013-37

Klassifikation
Wirtschaft
Thema
Uncertainty and monetary policy
Monetary and financial indicators

Ereignis
Geistige Schöpfung
(wer)
Chang, Bo Young
Feunou, Bruno
Ereignis
Veröffentlichung
(wer)
Bank of Canada
(wo)
Ottawa
(wann)
2013

DOI
doi:10.34989/swp-2013-37
Handle
Letzte Aktualisierung
10.03.2025, 11:45 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Chang, Bo Young
  • Feunou, Bruno
  • Bank of Canada

Entstanden

  • 2013

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