Publication Date

1-1-2008

Document Type

Dissertation/Thesis

First Advisor

Jensen, Gerald R.

Degree Name

B.S. (Bachelor of Science)

Legacy Department

Department of Finance

Abstract

The relationship between the Federal Reserve monetary policy and the CBOE volatility index, VIX, is examined. Volatility plays a crucial role in pricing derivatives; therefore, an understanding of how macroeconomic factors affect asset prices and volatility is important to market participants. Daily trading data is examined from January 2nd, 1990 to February 29th, 2008. A significant relationship is identified between measures of monetary policy and the VIX, which suggests that the volatility implicit in derivatives is influenced by monetary policy. In particular, volatility is shown to be significantly higher (lower) when the Federal Reserve is following an expansive (restrictive) monetary policy.

Extent

9 unnumbered pages

Language

eng

Publisher

Northern Illinois University

Rights Statement

In Copyright

Rights Statement 2

NIU theses are protected by copyright. They may be viewed from Huskie Commons for any purpose, but reproduction or distribution in any format is prohibited without the written permission of the authors.

Media Type

Text

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