What are the odds? option-based forecasts of FOMC target changes

William Emmons, Aeimit Lakdawala and Christopher Neely

Review, 2006, vol. 88, issue Nov, 543-562

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.

Keywords: Forecasting; Monetary policy; Federal Open Market Committee (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlrv:y:2006:i:nov:p:543-562:n:v.88no.6

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