Unconventional Monetary Policy and Asset Price Risk

August 30, 2013

Preview Citation

Format: Chicago

Shaun K. Roache, and Marina V Rousset. Unconventional Monetary Policy and Asset Price Risk, (USA: International Monetary Fund, 2013) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

We examine the effects of unconventional monetary policy (UMP) events in the United States on asset price risk using risk-neutral density functions estimated from options prices. Based on an event study including a key exchange rate, an equity index, and five commodities, we find that “tail risk” diminishes in the immediate aftermath of UMP events, particularly downside left tail risk. We also find that QE1 and QE3 had stronger effects than QE2. We conclude that UMP events that serve to ease policies can help to bolster market confidence in times of high uncertainty.

Subject: Asset prices, Commodity prices, Exchange rates, Financial institutions, Foreign exchange, Futures, Monetary policy, Options, Prices, Unconventional monetary policies

Keywords: Asset prices, Central Banks and their Policies, Commodity prices, Event price distribution, Event Studies, Exchange rates, Exercise price, FOMC asset purchase announcement, Futures Pricing, Global, Monetary policy, Option Pricing, Options, Price characteristic, U.S. dollar, Unconventional monetary policies, WP

Publication Details

Pages:

26
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/190
Stock No:

WPIEA2013190
ISBN:

9781484383230
ISSN:

1018-5941

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