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Option-implied expectations in commodity markets and monetary policy

Triantafyllou, Athanasios and Dotsis, George (2017) 'Option-implied expectations in commodity markets and monetary policy.' Journal of International Money and Finance, 77 (C). pp. 1-17. ISSN 0261-5606

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Abstract

In this paper we estimate the dynamic interactions between option-implied variance and skewness in agricultural commodity markets and monetary policy. Using a structural vector autoregressive (SVAR) framework, we find that an expansionary (contractionary) monetary policy upwardly (downwardly) revises commodity markets’ expectations about the price and volatility path of agricultural products. On the other hand, our empirical analysis reveals that monetary policy does not have a systematic and timely response to sudden changes in option implied expectations of commodity investors. In addition, we provide empirical evidence showing the robust forecasting power of agricultural option-implied information on monetary policy with R² values reaching almost 52%.

Item Type: Article
Uncontrolled Keywords: Monetary policy; Implied variance and skewness; Agricultural commodities
Divisions: Faculty of Social Sciences
Faculty of Social Sciences > Essex Business School
SWORD Depositor: Elements
Depositing User: Elements
Date Deposited: 07 Oct 2021 14:51
Last Modified: 23 Sep 2022 19:18
URI: http://repository.essex.ac.uk/id/eprint/30099

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