Macroeconomic derivatives
Subtitle: an initial analysis of market-based macro forecasts, uncertainty and risk
By: by Refet S. Gürkaynak, Justin Wolfers.
Contributors: Wolfers, Justin.
Series: Discussion paper ;; no. 1899; Discussion paper (Forschungsinstitut zur Zukunft der Arbeit : Online) ;; no. 1899
Publisher: IZA
Published: 2005
Place of publication: Bonn, Germany
Language: eng
Format: Electronic resource
Subjects: Derivative securities.; Macroeconomics.
Description: "In September 2002, a new market in "Economic Derivatives" was launched allowing traders to take positions on future values of several macroeconomic data releases. We provide an initial analysis of the prices of these options. We find that market-based measures of expectations are similar to survey-based forecasts although the market-based measures somewhat more accurately predict financial market responses to surprises in data. These markets also provide implied probabilities of the full range of specific outcomes, allowing us to measure uncertainty, assess its driving forces, and compare this measure of uncertainty with the dispersion of point-estimates among individual forecasters (a measure of disagreement). We also assess the accuracy of market-generated probability density forecasts. A consistent theme is that few of the behavioral anomalies present in surveys of professional forecasts survive in equilibrium, and that these markets are remarkably well calibrated. Finally we assess the role of risk, finding little evidence that risk-aversion drives a wedge between market prices and probabilities in this market"--Forschungsinstitut zur Zukunft der Arbeit web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 12/19/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.