| 来源类型 | Discussion paper
|
| 规范类型 | 论文
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| 来源ID | DP2315
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| DP2315 Endogenous Business Cycles and the Dynamics of Output, Hours, and Consumption |
| Stephanie Schmitt-Grohé
|
| 发表日期 | 1999-12-17
|
| 出版年 | 1999
|
| 语种 | 英语
|
| 摘要 | The paper analyzes foreign investment and asset prices in a context of uncertainty over future government policy. The model endogenizes the process of learning by foreign investors facing a potentially opportunistic government, which chooses strategically the timing of a policy reversal in order to attract more capital. We characterize the evolution of confidence, investment, and asset prices over time, as well as perceived policy risk. Quite generally, perceived risk abates as current policy is maintained, leading to a gradual appreciation of asset prices and a gradual decrease in their conditional variance. The approach thus provides a measure of the evolution over time of perceived political risk from market prices.
We next compute option prices under the process generated by the model's hazard rate of policy reversal plus an additional market risk component. We show that both the time series and the term structure of conditional volatility in general is downward sloping and its overall level falls steadily over time, although it may exhibit initially a hump shape in the case of very low initial reputation. Another testable implication is that in price series without a policy reversal, implied volatility from option prices will exceed actual volatility. Over time, and in the absence of a reversal, this wedge progressively disappears. This may be viewed as the volatility analogue of the 'peso premium' for assets subject to large, infrequent price drops. |
| 主题 | Financial Economics
|
| 关键词 | Implied volatility
International asset pricing
Option pricing
Political risk
Volatility
|
| URL | https://cepr.org/publications/dp2315
|
| 来源智库 | Centre for Economic Policy Research (United Kingdom)
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| 资源类型 | 智库出版物
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| 条目标识符 | http://119.78.100.153/handle/2XGU8XDN/531406
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推荐引用方式
GB/T 7714 |
Stephanie Schmitt-Grohé. DP2315 Endogenous Business Cycles and the Dynamics of Output, Hours, and Consumption. 1999.
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