Extração de Informação de Opções Cambiais no Brasil

Eui Chang and Benjamin Miranda Tabak ()

No 104, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: This paper presents a method for extracting risk neutral densities for exchange rate options. Implied volatility may be used as a forecast for future volatility and the predicted density to assess the future evolution of market expectations regarding prices in financial market. Implied skewness and kurtosis are interpreted as measures of market sentiment related to the direction of future movements in the exchange rate and the probability of occurrence of extreme events, respectively. These measures can be interpreted as forward looking macroprudential indicators for the domestic financial system. Furthermore, the results obtained from the options market are compared with densities obtained from a survey conducted with economists by the Central Bank of Brazil, leading to conclude that both possess relevant information. The methodology employed in this paper may be generalized and applied to contracts of different duration and different types of assets.

Date: 2006-04

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Persistent link: http://EconPapers.repec.org/RePEc:bcb:wpaper:104

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