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An Option for Anticipating Fed Action

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Options contracts on federal funds futures, a new financial instrument introduced earlier this year, can be analyzed to gauge public expectations of future Fed actions. The real bonus is that they can detect differences of opinion when markets see more than two possible outcomes for an FOMC meeting as well as the likelihood associated with each.

Options contracts on federal funds futures, a new financial instrument introduced earlier this year, can be analyzed to gauge public expectations of future Fed actions. The real bonus is that they can detect differences of opinion when markets see more than two possible outcomes for an FOMC meeting as well as the likelihood associated with each.


Suggested citation: Carlson, John B., William R. Melick, and Erkin Y. Sahinoz, 2003. "An Option for Anticipating Fed Action," Federal Reserve Bank of Cleveland, Economic Commentary, 09.01.2003.

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