Scheduled announcements and volatility patterns: the effects of monetary policy committee announcements on LIBOR and short sterling futures and options
Sung, Peng and Sutcliffe, Charles (2003) Scheduled announcements and volatility patterns: the effects of monetary policy committee announcements on LIBOR and short sterling futures and options. Journal of Futures Markets, 23, (8), 773-797. (doi:10.1002/fut.10083).
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Description/Abstract
Both the UK spot and futures markets in short-term interest rates are found to react strongly to surprises in the scheduled announcements of the repo rate and RPI. Therefore, these announcements should also affect the market for options on short-term interest rate futures. Because the repo rate and RPI announcements are scheduled, the options market can predict the days on which announcement shocks may hit, and build this information into its volatility expectations. It is argued that the volatility used in pricing options should alter over time in a predictable nonlinear manner that varies with contract maturity and the number of forthcoming announcements; but is independent of announcement content. The empirical results support this hypothesis.
| Item Type: | Article |
|---|---|
| ISSNs: | 0270-7314 (print) |
| Related URLs: | |
| Subjects: | H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management |
| Divisions: | University Structure - Pre August 2011 > School of Management |
| Item ID: | 35637 |
| Date Deposited: | 22 May 2006 |
| Last Modified: | 02 Mar 2012 13:07 |
| Contributors: | Sung, Peng (Author) Sutcliffe, Charles (Author) |
| Date: | 2003 |
| Status: | Published |
| Contact Email Address: | cms@socsci.soton.ac.uk |
| URI: | http://eprints.soton.ac.uk/id/eprint/35637 |
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