Luo, Dan; Mariscal, Iris Biefang-Frisancho; Howells, Peter - Department of Accounting, Economics and Finance, … - 2011
We use vector autoregressive models to estimate the effect of monetary policy on investors’ risk aversion. The latter is proxied by a variety of option based implied volatility indices for Germany and the UK. There is clear evidence of a procyclical response between monetary policy and risk...