The impact of central bank digital currency variation on firm's implied volatility

Chien-Chiang Lee (), Chih-Wei Wang, Hsin-Yi Hsieh and Wen-Ling Chen

Research in International Business and Finance, 2023, vol. 64, issue C

Abstract: The paper investigates whether a firm's implied volatility is affected by the volatility of central bank digital currencies. Our sample covers 2853 listed companies in the United States from 2014 to 2018. First, we find the variation of central bank digital currency has a positive impact on a firm’s implied volatility. Second, the healthier firms’ conditions can reduce the relationship between central bank digital currency variation and a firm’s implied volatility. Third, the positive relation between central bank digital currency and firm’s implied volatility still exists in investment-grade, speculative-grade, and unrated firms. Finally, to eliminate the endogeneity problem, we adopt simultaneous equation models (SEM) and find our results are still robust after excluding endogenous concerns. Our research provides a reminder for corporate managers and new implications for policymakers.

Keywords: Central bank digital currency; Implied volatility; Simultaneous equation models (search for similar items in EconPapers)
JEL-codes: E42 E58 G34 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:64:y:2023:i:c:s0275531923000041

DOI: 10.1016/j.ribaf.2023.101878

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