What are the odds? option-based forecasts of FOMC target changes
Abstract: This article uses probability forecasts derived from options to assess evolving market uncertainty about Federal Reserve monetary policy actions in a variety of recent events and episodes. Options on federal funds futures contracts reveal a complete probability density function over possible Federal Reserve target rates, thus augmenting the expectations provided by federal funds futures contracts. Option-based forecasts are most useful when more than two federal funds target outcomes are plausible at an upcoming policy meeting.
File(s): File format is application/pdf https://files.stlouisfed.org/files/htdocs/publications/review/06/11/Emmons.pdf
Provider: Federal Reserve Bank of St. Louis
Part of Series: Review
Publication Date: 2006