Unconventional Monetary Policy and Asset Price Risk
Electronic Access:
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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.
Series:
Working Paper No. 2013/190
Subject:
Asset prices Commodity prices Exchange rates Financial institutions Foreign exchange Futures Monetary policy Options Prices Unconventional monetary policies
English
Publication Date:
August 30, 2013
ISBN/ISSN:
9781484383230/1018-5941
Stock No:
WPIEA2013190
Pages:
26
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