US Dollar (USD) LIBOR rates: technical predictability overview - LIBOR volatilities

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Written by Forex Automaton   
Wednesday, 01 October 2008 10:42
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US Dollar (USD) LIBOR rates: technical predictability overview
LIBOR volatilities
LIBOR autocorrelations
LIBOR cross-correlations
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LIBOR volatilities

Table 1: Day-by-day volatilities (RMS) for the time series of logarithmic returns in USD LIBOR in 2002-2008.

duration time scalevolatility (RMS)
s/n-o/n day 3.1×10-2
week day 1.4×10-2
month day 8.5×10-3
3 months day 8.4×10-3
12 months day 1.9×10-2

Distribution of logarithmic returns in s/n-o/n and 1-week USD LIBOR rates Distribution of logarithmic returns in 1-month, 3-month and 12-month USD LIBOR rates

Fig.3: Distributions of logarithmic returns in USD LIBOR rates, top: s/n-o/n and 1-week, bottom: 1-month, 3-month and 12-month maturity. Volatility is a measure of the width of the return distribution.

As you could have guessed from inspecting Fig.2, s/n-o/n LIBOR is more volatile than 1-week, whereas 12-month LIBOR is more volatile than 1-month and 3-month. Forex distributions on a shorter scale (one hour) look much less volatile than LIBOR, the "fat tails" in LIBOR distributions are truly amazing.



Last Updated ( Monday, 04 January 2010 12:29 )