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Working Paper
Extracting market expectations from option prices: case studies in Japanese option markets
This paper focuses on the recently developing financial derivatives markets, and examines the usefulness of option prices as an information variable for monetary policy implementation. A set of option prices provides us with information on the whole probability distribution of the future values of underlying assets. Such information enables us to examine the development of market expectations. The paper estimates a time series of implied probability distributions from daily option prices on stock prices and long term government bond futures. The estimation is done for a sample of daily ...