The Probability Density Function of Interest Rates Implied in the Price of Options

Fabio Fornari () and Roberto Violi

No 339, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: The paper contributes to the stochastic volatility literature by developing simulation schemes for the conditional distributions of the price of long term bonds and their variability based on non-standard distributional assumptions and volatility concepts; it illustrates the potential value of the information contained in the prices of options on long and short term lira interest rate futures for the conduct of monetary policy in Italy, at times when significant regime shifts have occured.

Keywords: stochastic models; statistical analysis; interest rates; financial market (search for similar items in EconPapers)
JEL-codes: C10 C60 E43 G12 (search for similar items in EconPapers)
Date: 1998-10
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Citations: View citations in EconPapers (2)

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Working Paper: The Probability Density Function of Interest Rates Implied in the Price of Options (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_339_98

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