Recovering market expectations of FOMC rate changes with options on federal funds futures
展示了如何用2003年3月上市的联邦基金期货期权，通过普通最小二乘法恢复联邦公开市场委员会未来利率决策的隐含概率密度函数，并评估数据发布和美联储沟通对政策结果感知概率的影响。
Abstract This article demonstrates how options on federal funds futures, which began trading in March 2003, can be used to recover the implied probability density function (PDF) for future Federal Open Market Committee (FOMC) interest‐rate outcomes. The discrete nature of the choices made by the FOMC allows for a very straightforward recovery of the implied PDF using ordinary‐least‐squares (OLS) estimation. This simple recovery method stands in contrast to the relatively complicated PDF recovery techniques developed for options written on assets such as equities, foreign exchange, or commodity futures, where the underlying prices are most appropriately modeled as being drawn from continuous distributions. The OLS estimation is used to recover PDFs for single FOMC meetings as well as PDFs for joint estimation of multiple FOMC meetings, and allows for the imposition of restrictions on the recovered probabilities, both within and across FOMC meetings. Finally, recovered probabilities are used to assess the impact of data releases and Fed communication on the perceived likelihood of actual policy outcomes. © 2005 Wiley Periodicals, Inc. Jrl Fut Mark 25:1203–1242, 2005