Relationship Between Libor Volatility And Stock Market Parameters
by Mohammad Farhad Zangeneh
With spread of financial crisis in US and Europe governments decided to take action in the market in order to stop expansion. Falls of capital market have put countries’ economies in danger. Reducing interest rates have been one of the main decisions of authorities during this era. The reduction of interest rate is supposed to increase stock market performance. Predicting market trend volatility could be a great help to investors for preventing losses. LIBOR as a main reference for several key interest rates could have an important part in this prediction. Observing historical data of stock market and also LIBORs in three different countries with three different economy and market abilities would help to figure out how changes in LIBOR rate will affect stock market. GARCH models are proper tools to observe time series data By using this model and studying difference in simulated data it is possible to find out relationship between changes LIBOR and stock market performance.
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