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Date: Sept. 23 (Friday) 14:00 – 15:30
Venue: Kuan Te Lecture Hall, 2F, Building 1 College of Management, NTU (臺灣大學管理學院一號館2F冠德講堂)
Topics: Central Bank Policy Impacts on the Distribution of Future Interest Rates
Speaker: Prof. Douglas T. Breeden, William W. Priest Professor of Finance, Duke University, Fuqua School of Business, and Co-Founder and Senior Research Consultant, Amundi Smith Breeden.
Host: Department of Finance, NTU, Center for Research in Econometric Theory and Applications (CRETA)
Registration: No Charge
1.Before and after analysis shows that the U.S. Federal Reserve and the European Central Bank’s policies often have significant impacts on the distributions for future interest rates. Fed, ECB and Bank of England research papers show central bank awareness.
2. Interest Rate Caps and Floors have been used for the last 30 years to hedge interest rate risks of financial institutions. They are portfolios of interest rate put and call options. We show how to use their prices to estimate the market’s implied “insurance prices” for what LIBOR will be 3 to 5 years in the future.
3. Empirically, interest rate insurance prices 2003-2016 have shifted from bellshaped curves to positively skewed ones. Some key market prices show “bipolar” views on future rates that reflect either (1) normalization or (2) fears of recession or deflation.
14:45-15:00 Coffee Break
15:00-15:30 Lecture and Q&A
Lecture in English