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Fed fund futures
Posted: September 10th, 2006, 1:20 pm
by nujoan
Hi,How can i know how many percentage market prices in that the FOMC will increase/decrease Fed fund rate? Understand that this has to be calculated from Fed fund futures.Thanks for your help.
Fed fund futures
Posted: September 10th, 2006, 6:54 pm
by farmer
You look at the meeting schedule. And you make some assumptions, like what the chances are of raising between meetings, half-point moves, and so on. Really the fed-fund futures have to be used in combination with what they say and have said and have done, I don't think there is a strictly mathematical way to do it, though I guess you could look at options and stuff.
Fed fund futures
Posted: September 10th, 2006, 8:09 pm
by Lepperbe
Fed fund futures
Posted: September 12th, 2006, 9:12 am
by Icecloud
The way I do it is to use simplistic expected values and assume 2 states: no move, or a 25bp hike (or say, no move vs 25bps cut). The assume with prob x they will not move, and 1-x they will move 25bps, and find x such that the expected value of the Euro/$ futures is equal to the current market price...