A Quantitative Mirror on the Euribor Market Using Implied Probability Density Functions

45 Pages Posted: 4 Jan 2011

Date Written: December 16, 2010

Abstract

This paper presents a set of probability density functions for Euribor outturns in three months’ time, estimated from the prices of options on Euribor futures. It is the first official and freely available dataset to span the complete history of Euribor futures options, thus comprising over ten years of daily data, from 13 January 1999 onwards. Time series of the statistical moments of these option-implied probability density functions are documented until April 2010. Particular attention is given to how these probability density functions, and their associated summary statistics, reacted to the unfolding financial crisis between 2007 and 2009. In doing so, it shows how option-implied probability density functions could be used to contribute to monetary policy and financial stability analysis.

Keywords: financial market, probability density functions, options, financial crisis

JEL Classification: C13, C14, G12, G13

Suggested Citation

de Vincent-Humphreys, Rupert and Puigvert Gutierrez, Josep Maria, A Quantitative Mirror on the Euribor Market Using Implied Probability Density Functions (December 16, 2010). ECB Working Paper No. 1281, Available at SSRN: https://ssrn.com/abstract=1726330 or http://dx.doi.org/10.2139/ssrn.1726330

Rupert De Vincent-Humphreys (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Josep Maria Puigvert Gutierrez

European Central Bank ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

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