Banque de France paper studies welfare cost of uncertainty
Study analyses index option markets
A working paper published by the Banque de France today introduces the "term structure of the cost of uncertainty" as a measure of the trade-off between growth and macroeconomic stability at different time horizons.
In The term structure of the welfare cost of uncertainty, Pierlauro Lopez analysed index option markets "to infer a downward-sloping, volatile and procyclical term structure of welfare costs".
The economist says that, over time, "the term structure of welfare costs varies
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