A Critique of John B. Taylor's "Expectations, Open Market Operations, and Changes in the Federal Funds Rate"

Recovering market expectations of FOMC r

Recovering market expectations of FOMC rate changes with options on federal funds futures

✍ John B. Carlson; Ben R. Craig; William R. Melick 📂 Article 📅 2005 🏛 John Wiley and Sons 🌐 English ⚖ 350 KB

## 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