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New Techniques to Extract Market expectations from Financial Instruments

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Author Info
Söderlind, Paul () (Department of Economics)
Svensson, Lars E.O. () (Institute of International Economic Studies)

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Abstract

This paper is a selective survey of new or recent methods to extract information about market expectations from asset prices for monetary policy purposes. Traditionally, interest rates and forward exchange rates have been used to extract expected means of future interest rates, exchange rates and inflation. More recently, these methods have been refined to rely on implied forward interewst rates, so as to extract expected future time-paths. Very recently, methods have been designed to extract not only the means but the whole (risk neutral) probability distribution from a set of option prices.

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Publisher Info
Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 142.

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Length: 47 pages
Date of creation: Dec 1996
Date of revision:
Publication status: Published in Journal of Monetary Economics, 1997, pages 383-429.
Handle: RePEc:hhs:hastef:0142

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Related research
Keywords: Interest rates; exchange rates; inflation; options; forward rate curve; risk neutral distribution;

Other versions of this item:

Find related papers by JEL classification:
E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Backus, David K. & Gregory, Allan W. & Zin, Stanley E., 1989. "Risk premiums in the term structure : Evidence from artificial economies," Journal of Monetary Economics, Elsevier, vol. 24(3), pages 371-399, November. [Downloadable!] (restricted)
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  2. Backus, David K & Gregory, Allan W & Telmer, Chris I, 1993. " Accounting for Forward Rates in Markets for Foreign Currency," Journal of Finance, American Finance Association, vol. 48(5), pages 1887-1908, December. [Downloadable!] (restricted)
    Other versions:
  3. David Backus & Silverio Foresi & Chris Telmer, 1996. "Affine Models of Currency Pricing," NBER Working Papers 5623, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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Did you know? The RePEc project started in 1997. Its precursor, NetEc, dates back to 1993.

This page was last updated on 2009-11-3.


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