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Articles 1 - 12 of 12
Full-Text Articles in Social and Behavioral Sciences
Aggregate Exchange Rate Pass-Through: Instability And Inference, Will Melick
Aggregate Exchange Rate Pass-Through: Instability And Inference, Will Melick
Will Melick
The instability displayed by aggregate, economic specifications of passthrough has been cited as evidence in theoretical models of passthrough that allow for hysteresis. This paper argues that 1) and unstable economic specification should not be used as evidence in favor of a theoretical model and 2) Aggregate models of passthrough are very misinformative, given the different market structures that are likely to be aggregated.
Alternative Approaches To Real Exchange Rates And Real Interest Rates: Three Up And Three Down, Will Melick
Alternative Approaches To Real Exchange Rates And Real Interest Rates: Three Up And Three Down, Will Melick
Will Melick
This paper examines the relationship between real exchange rates and real interest rates using three different approaches across four currencies and two horizons with 20 years of data. Each approach gives some encouragement that this relationship might hold, but each approach also encounters problems establishing the form or usefulness of the relationship. On balance, this paper contributes to the literature by finding more encouraging results than in earlier studies, but it still remains to be demonstrated that the real exchange rate-real interest rate relationship is the linchpin to explaining exchange rate movements.
Exchange Rates And Capital Flows In Industrial Countries, Will Melick
Exchange Rates And Capital Flows In Industrial Countries, Will Melick
Will Melick
No abstract provided.
Confidence Intervals And Constantmaturity Series For Probability Measures Extracted From Options Prices, Will Melick
Confidence Intervals And Constantmaturity Series For Probability Measures Extracted From Options Prices, Will Melick
Will Melick
This paper provides some initial findings on two issues arising from the extraction of PDFs. First, many heavily traded options are traded on listed exchanges with contracts expiring at fixed dates. This imparts a maturity dependence to summary statistics (e.g., moments or probabilities of being above or below a certain price) calculated from the PDFs implied by these options. That is, the summary statistics are limited in that there will only be as many observations as the number of days the option contract is traded (often a year at most), and the statistics will not be comparable because each applies …
Recovering An Asset’S Implied Pdf From Option Prices: An Application To Oil Prices During The Gulf Crisis, Will Melick
Recovering An Asset’S Implied Pdf From Option Prices: An Application To Oil Prices During The Gulf Crisis, Will Melick
Will Melick
We develop a general method for estimating the implied, martingale equivalent, probability density function (PDF) for futures prices from American options prices. The early exercise feature of American options precludes expressing the price of the option in terms of the PDF. There exist tight bounds for the price of American options in terms of the PDF. We demonstrate how these bounds, together with observed option prices, can be used to estimate the parameters of the PDF. We estimate the distribution for crude oil during the Persian Gulf crisis and find the distribution differs significantly from that recovered using standard techniques.
Review Of Global Capital Markets: Integration, Crisis, And Growth – By Maurice Obstfeld And Alan M. Taylo, Will Melick
Review Of Global Capital Markets: Integration, Crisis, And Growth – By Maurice Obstfeld And Alan M. Taylo, Will Melick
Will Melick
No abstract provided.
Foreign Exchange Market Intervention And Expectations: An Empirical Study Of The Yen/Dollar Exchange Rate, Will Melick, Gabriele Galati, Marian Micu
Foreign Exchange Market Intervention And Expectations: An Empirical Study Of The Yen/Dollar Exchange Rate, Will Melick, Gabriele Galati, Marian Micu
Will Melick
We use official intervention data provided by the Federal Reserve and, recently, the Japanese Ministry of Finance, as well as a new data set based on Reuters news articles on intervention that is perceived by FX traders. We estimate probability density functions (PDFs) from option data to describe market expectations. We find that, between 1993 and 1996, Japanese authorities tended to respond mainly to deviations of the exchange rate from some implicit target levels and to a rise in market uncertainty. Between 1997 and 2000, the Bank of Japan mainly reacted in response to higher uncertainty. On the other hand, …
Fomc Communications And The Predictability Of Near-Term Policy Decisions, Will Melick
Fomc Communications And The Predictability Of Near-Term Policy Decisions, Will Melick
Will Melick
In February 1994, the FOMC began a new era in transparency, gradually building a communications apparatus that conveys information about the Committee’s decisions and expectations. Has the new apparatus improved the public’s ability to predict FOMC interest rate decisions? New research based on the prices of fed funds futures shows that over the past decade, it has, especially over horizons of two to three months
Option Prices, Exchange Market Intervention, And The Higher Moment Expectations Channel: A User’S Guide, William Melick, Gabriele Galati, Patrick Higgins, Owen Humpage
Option Prices, Exchange Market Intervention, And The Higher Moment Expectations Channel: A User’S Guide, William Melick, Gabriele Galati, Patrick Higgins, Owen Humpage
Will Melick
A vast literature on the effects of sterilized intervention by the monetary authorities in the foreign exchange markets concludes that intervention systematically moves the spot exchange rate only if it is publicly announced, coordinated across countries, and consistent with the underlying stance of fiscal and monetary policy. Over the past 15 years, researchers have also attempted to determine if intervention has any effects on the dispersion and directionality of market views concerning the future exchange rate. These studies usually focus on the variance around the expected future exchange rate—the second moment. In this paper we demonstrate how to use over-the-counter …
Understanding The Empirical Literature On Purchasing Power Parity: The Post-Bretton Woods Era, Will Melick
Understanding The Empirical Literature On Purchasing Power Parity: The Post-Bretton Woods Era, Will Melick
Will Melick
No abstract provided.
An Option For Anticipating Fed Action, Will Melick
An Option For Anticipating Fed Action, Will Melick
Will Melick
Options contracts on federal funds futures, a new financial instrument introduced earlier this year, can be analyzed to gauge public expectations of future Fed actions. The real bonus is that they can detect differences of opinion when markets see more than two possible outcomes for an FOMC meeting as well as the likelihood associated with each.
Recovering Market Expectations Of Fomc Rate Changes With Options On Federal Funds Futures, William Melick, John Carlson, Ben Craig
Recovering Market Expectations Of Fomc Rate Changes With Options On Federal Funds Futures, William Melick, John Carlson, Ben Craig
Will Melick
U.S. Federal Open Market Committee (FOMC) meetings command a great deal of attention because at these meetings changes occur in the federal funds rate. Analysts have used a variety of means to estimate the probability and amount of any potential rate change, such as extracting estimates from the prices of federal funds futures contracts. The authors describe a technique that uses prices of traded options on federal funds futures contracts to recover the implied probability density function (PDF) for future FOMC interest rate decisions. This relatively simple method provides PDFs for individual and multiple FOMC meetings. The techniques should help …