Market Volatility As a Financial Soundness Indicator
Author | : MissLiliana Schumacher |
Publisher | : International Monetary Fund |
Total Pages | : 40 |
Release | : 2003-03-01 |
ISBN-10 | : 9781451846669 |
ISBN-13 | : 1451846665 |
Rating | : 4/5 (69 Downloads) |
Download or read book Market Volatility As a Financial Soundness Indicator written by MissLiliana Schumacher and published by International Monetary Fund. This book was released on 2003-03-01 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial decisions of economic agents are based on volatility considerations. However, no aggregate indicators have been used by policymakers and regulators to assess the market risk environment. This paper applies a market volatility indicator to analyze the Israeli's transition toward inflation targeting. Unlike conventional measures of volatility, it shows a substantial decline once volatility is measured against the minimum variance for the same returns on assets. Using a conventional Multivariate GARCH model, we find that interest rates sensitivity to changes in the risk environment may be important for a correct identification of volatility patterns of individual assets.