Expectations Hypothesis of the Term Structure of Implied Volatility: Evidence from Foreign Currency and Stock Index Options

Using a stochastic volatility option pricing model, we showthat the implied volatilities of at-the-money options are notnecessarily unbiased and that the fixed interval time-seriescan produce misleading results. Our results do not support theexpectations hypothesis: long-term volatilities rise relativeto short-term volatilities, but the increases are not matchedas predicted by the expectations hypothesis. In addition, anincrease in the current long-term volatility relative to thecurrent short-term volatility is followed by a subsequent decline.The results are similar for both foreign currency and the S&P500 stock index options.     

New Hope for the Expectations Hypothesis of the Term Structure of Interest Rates

Survey data on interest rate expectations permit separate testing of the two alternative hypotheses in traditional term structure tests: that the expectations hypothesis fails, and that expected future interest rates are ex post inefficient forecasts. We find that the source of the spread's poor predictions of future interest rates varies with maturity. At short maturities the expectations hypothesis fails. At long maturities, however, changes in the yield curve reflect changes in expected future rates one-for-one, an implication of the expectations hypothesis. This result confirms earlier findings that long rates underreact to short rates, but now it cannot be attributed to term premia.     

人民币汇率、外汇储备累积与宏观经济波动

汇改后,外部经济失衡成为了政府部门的"棘手"问题。选取2000年1月~2008年2月的时间序列数据检验外汇储备累积带来的宏观经济和金融波动影响,并借助ARCH模型和TVP模型进行动态分析得出:外汇储备在长期内影响价格波动,而对产出的影响具有短期性;外汇储备对经济增长的动态波动系数为β1=-0.09,外部失衡下经济高增长波动较小,低速增长时期的波动加大;而对国内宏观金融的影响则恰好相反(分别为1β=0.08和1β=0.689);TVP模型检验得出,国内产出增加和FD I流入都不是国际收支波动的主要影响因素,而进口和外汇储备占款成为国际收支失衡量的重要影响因素。因此,解决"内外"经济平衡的关键是要运用汇率、利率、物价水平调节国际收支及外汇储备。     

Expectations Hypothesis and Term Structure of Interest Rates: An Evidence from Emerging Market

The integration of emerging economies with developed economies has changed the behaviour of interest rates and exchange rate fluctuation. The current study tries to analyse the implication of expectation hypothesis (EH) and term structures of interest rates between India and US. Using vector auto regressive estimates, the study tries to test the dynamic interdependence of interest rates on exchange rate fluctuation. Further, the study estimates Granger causality tests and Impulse Response Functions to test the behaviour of interest rate movements for a period of nineteen years ranging from June 1996 to June 2015.The empirical results of the study show evidence in line with the existence of EH in the case of emerging market. Nevertheless, in the case of advanced economies we do not find any evidence for EH. The findings revealed that the spread between long and short rate of India is influenced by short-term interest rates and past values of Indian spread. This implies that the fluctuations in the long rate over the short rate evidenced the strong presence of EH as far as emerging economy is concerned.To the best of our knowledge, this is the first study in Indian market, which tests the role of EH in interest rate fluctuations along with exchange rate. Since majority of the studies on term structure of interest rates focus on developed markets, the present study is an attempt to test the causal relationship between developed and developing economies.     

企业外汇融资取向

资金是企业生存发展的血液。对与国际市场紧密联系的涉外企业来说,外汇融资对涉外企业生产经营、外汇资金运作和合理配置发挥着至关重要的作用。     

Temporal Patterns in Foreign Exchange Returns and Options

Although the foreign exchange market is believed to be one of the most efficient financial markets in the world, there is significant evidence that technical analysis is profitable in this market. In this study we investigate the ability of information from the options market to supplement the commonly used information on past prices to predict temporal patterns in foreign exchange returns. We find that strategies using information from at-the-money options were more consistently profitable than the commonly used strategies based on only historical spot exchange rates (past prices). Consequently, options appear to contain information regarding future spot exchange rate movements.     

Does the Failure of the Expectations Hypothesis Matter for Long‐Term Investors?

We solve the portfolio problem of a long‐run investor when the term structure is Gaussian and when the investor has access to nominal bonds and stock. We apply our method to a three‐factor model that captures the failure of the expectations hypothesis. We extend this model to account for time‐varying expected inflation, and estimate the model with both inflation and term structure data. The estimates imply that the bond portfolio of a long‐run investor looks very different from the portfolio of a mean‐variance optimizer. In particular, time‐varying term premia generate large hedging demands for long‐term bonds.     

The Pricing of Options on Assets with Stochastic Volatilities

One option-pricing problem that has hitherto been unsolved is the pricing of a European call on an asset that has a stochastic volatility. This paper examines this problem. The option price is determined in series form for the case in which the stochastic volatility is independent of the stock price. Numerical solutions are also produced for the case in which the volatility is correlated with the stock price. It is found that the Black-Scholes price frequently overprices options and that the degree of overpricing increases with the time to maturity.     

The Accuracy of Density Forecasts from Foreign Exchange Options

Financial decision makers often consider the information incurrency option valuations when making assessments about futureexchange rates. The purpose of this article is to systematicallyassess the quality of option-based volatility and density forecasts.We use a unique dataset consisting of more than 10 years ofdaily data on over-the-counter (OTC) currency option prices.We find that the OTC implied volatilities provide largely unbiasedand fairly accurate forecasts of one-month- and three-month-aheadrealized volatility. Furthermore, we find that the one-monthoption implied density forecasts are well calibrated for thecenter of the distribution, but we find evidence of misspecificationin the tail density forecasts.     

Arbitrage and the Expectations Hypothesis

This paper shows that all traditional forms of the expectations hypothesis can be consistent with the absence of arbitrage if markets are incomplete. A key implication is that the validity of the expectations hypothesis is purely an empirical issue; the expectations hypothesis cannot be ruled out on a priori theoretical grounds.     

Forecasting Emerging Market Exchange Rates from Foreign Equity Options

The use of derivatives to infer future exchange rates has long been a subject of interest in the international finance literature. With the recent currency crises in Mexico, Southeast Asia, and Brazil, work on exchange rate expectations in emerging markets is of particular interest. For some emerging markets, foreign equity options are the only liquid exchange‐traded derivatives with currency information embedded in their prices. Given that emerging markets sometimes undergo currency realignment with discrete jumps in their exchange rate, estimation of risk‐neutral probability density functions from foreign equity option data provides valuable evidence concerning market expectations. To illustrate the use of foreign equity options in estimating market beliefs, we consider Telmex options around the 1994 peso devaluation and find evidence that markets anticipated the change in the Mexican government's foreign exchange policy.     

Pricing Foreign Exchange Options Under Intervention by Absorption Modeling

We consider option pricing for a foreign exchange (FX) rate where interventions by an authority may take place when the rate approaches to a certain level at the down side. We formulate the forward FX model by a diffusion process which is stopped by a hitting time of an absorption boundary. Moreover, for a deterministic volatility case with a moving absorption whose level is described by an ordinary differential equation, we obtain closed-form formulas for prices of a European put option and a digital option, and Greeks of the put option. Furthermore, we show an extension of the pricing formula to the case where the intervention level is unknown. In numerical examples, we show option prices for different strikes for the absorption model and the extended model. We compare the model prices with the market prices for EURCHF options traded before January 2015 with the absorption model, and also show experiments of the extended model as an application to the pricing under uncertain views on the intervention.     

An Intraweek Seasonality in the Implied Volatilities of Individual and Index Options

This paper studies intraweek seasonalities in the implied volatilities of options on stock market indices. Oneway analysis of variance isolates the daily behavior of implied volatilities. The differential between call implied volatility and put implied volatility tends to drop on Friday and rise on Monday. Relying on a synthetic futures contract created from options, an explanatory model is proposed. The model complements previous research on the difference between the intraweek behavior of stock market indices and that of derivative instruments based on the indices.     

A Note on the Term Structure of Implied Volatilities for the Yen/U.S. Dollar Currency Option

This paper tests the relationship between short dated and long dated implied volatilities obtained from Tokyo market currency option prices by employing three different volatility models: a mean reverting model, a GARCH model, and an EGARCH model. We document evidence that long dated average expected volatility is higher than that predicted by the term structure relationship during the dramatic appreciation of yen/dollar exchange in the early 1990's. This revised version was published online in August 2006 with corrections to the Cover Date.     

中国金融市场通胀预期——基于利率期限结构的量度

通胀预期量度在以通胀预期为导向的货币政策中的意义重大。本文利用卡尔曼滤波法将离散时间两因子无套利广义高斯仿射模型运用于我国银行间债券市场,第一次从中国国债收益率曲线中分解出金融市场的中长期通胀预期L。将L与居民通胀预期和经济学家通胀预期比较,发现从事前看,L优于经济学家通胀预期,稍逊于居民通胀预期;从事后看,L优于居民通胀预期,稍逊于经济学家通胀预期。综合看,L作为金融市场形成的、高频的、反映中长期通胀的预期指数,对货币政策制定具有现实的参考意义。     

外汇市场、股票市场及预期通货膨胀对货币需求的影响

本文利用2005年7月到2012年12月的月度数据,使用菲利普斯—奥肯曲线计算预期通货膨胀率,将汇率、股票市场以及预期通货膨胀率纳入货币需求函数模型,通过协整检验、VEC模型以及VAR模型,研究了汇率、股市以及通胀预期对实际货币需求的影响,结果发现汇率、股市收益率以及通胀预期对实际货币需求的影响具有统计显著性,但是影响程度很小。     

我国外汇储备结构的优化分析

近年来我国外汇储备的一半以上都投资在了美国债券和以美元表示的不动产上。为最大限度地降低风险,外汇储备结构需适时调整。本文在遵循安全性、流动性、收益性的原则下,结合海勒-奈特模型、杜利模型考虑的相关因素,对我国外汇储备资产结构与币种结构进行优化分析,并给出对策建议。