Perceiving Uncertainty on Financial Markets During the Covid-19 Pandemic
| Author: | Bc. Matej Balažovič |
|---|---|
| Year: | 2022 - summer |
| Leaders: | PhDr. František Čech Ph.D. |
| Consultants: | |
| Work type: | Bachelors |
| Language: | English |
| Pages: | 47 |
| Awards and prizes: | |
| Link: | https://dspace.cuni.cz/handle/20.500.11956/173520 |
| Abstract: | This thesis examines the effects of the COVID-19 pandemic on forward rate agreements (FRA) spreads in the Czech Republic. Since FRA serves as a useful instrument to hedge against possible risk associated with interest rate movements, it is a relevant indicator of a consensus view and perceived uncertainty about the future financial situation. We measure the effects by employing ARMA-GJRGARCH modeling. Several COVID-19 indices, representing the government response to the pandemic, are included as explanatory variables. The results show a significant drop in FRA spreads as the pandemic began, as well as a strong increase in the FRA spreads volatility, which doubled during that period. Our main findings suggest that the COVID-19 affected the decrease of FRA spreads. However, we were not able to explain the volatility increase by the COVID-19 data. |
