SERVING THE QUANTITATIVE FINANCE COMMUNITY

 
mesk
Topic Author
Posts: 2
Joined: January 12th, 2018, 1:44 pm

Calculation of fed hike/cut probabilities

February 9th, 2018, 12:05 pm

How do I calculate the probability of Fed cutting the rate using both Fed Fund Futures and OIS rates?

I have attached the Fed hike probabilities quoted on Bloomberg on the 24th of January 2018. The second column shows hike probability, while the third and fourth shows cut probability and probability of no change, respectively. 

FED ssh'er 2018-01-24.PNG
Bloomberg picture


I have figured out how to calculate the hike probability (by following http://www.cmegroup.com/education/fed-f ... lator.html), and since the cut probabilities are 0%, I can also calculate the no change probability by following
P(no change) = 100% - P(hike).

But if the cut wasn't 0%, the formula would be
P(cut) + P(hike) + P(no change) = 100%

Does anyone know how to calculate P(cut)?
Last edited by mesk on February 9th, 2018, 12:08 pm
ABOUT WILMOTT

PW by JB

Wilmott.com has been "Serving the Quantitative Finance Community" since 2001. Continued...


JOBS BOARD

JOBS BOARD

Looking for a quant job, risk, algo trading,...? Browse jobs here...