Swiss Franc (CHF) LIBOR: technical predictability overview - CHF LIBOR volatility

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Written by Forex Automaton   
Monday, 10 November 2008 15:45
Article Index
Swiss Franc (CHF) LIBOR: technical predictability overview
CHF LIBOR volatility
CHF LIBOR autocorrelations
Correlations between CHF LIBOR maturities, s/n-o/n and longer terms
Correlations between CHF LIBOR maturities, 1-week and longer terms
Correlations between CHF LIBOR maturities, 1-month and longer terms
Correlations between CHF LIBOR maturities, 3-month and longer terms
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LIBOR volatility

Table 1: Day-by-day volatilities (RMS) for the time series of logarithmic returns in CHF LIBOR in 2002-2008, various maturities

duration time scalevolatility (RMS)
s/n-o/n day 7.3×10-2
week day 4.8×10-2
month day 2.6×10-2
3 months day 2.2×10-2
6 months day 2.2×10-2
12 months day 2.4×10-2

Volatility of CHF LIBOR seems to go down with duration in a more reliable fashion than for other currencies, in particular, USD and EUR. Like JPY, logarithmic returns in CHF look very volatile -- this is because the market think about interest rate variations in the "absolute", not relative sense, and because JPY and CHF interest rates are low, therefore interest rate moves worthy of market's attention are relatively large for these markets.

Distribution of logarithmic returns in s/n-o/n and 1-week CHF LIBOR rates Distribution of logarithmic returns in 3-month, 6-month and 12-month CHF LIBOR rates

Fig.2: Distributions of logarithmic returns in CHF LIBOR rates, top: s/n-o/n and 1-week, bottom: 1-month, 6-month and 12-month maturity. Volatility is a measure of the width of the return distribution.

The distribution of logarithmic returns look broader than power-law. Remember that with returns already containing logarithm and with the vertical axis explicitly logarithmic, we are looking at what is effectively a log-log plot, where any power law dependence would have looked linear, with different power law exponents resulting in different slopes.



Last Updated ( Monday, 27 December 2010 17:08 )