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Extracting Market Views from Derivative Prices

In: Derivatives Applications in Asset Management

Author

Listed:
  • Andrew Weisman

    (Market Revealed Preference)

Abstract

This chapter describes methods for extracting actionable market insights from derivatives prices, emphasizing their role as a reflection of collective investor expectations. It provides practical frameworks for deriving market views on key economic variables, including interest rate forecasts using federal funds futures, equity market risk via risk-neutral densities, and currency correlations through implied volatility analysis. Through simple real-world examples, the chapter illustrates how derivatives markets reveal preferences, enabling investors to ground their forecasts in objective market data. The discussion includes theoretical foundations, calculation methods, and Python-based implementations for replicating these analyses. By bridging theory and application, the chapter demonstrates how derivatives prices can inform strategic investment decisions, enhance risk management, and refine economic predictions, highlighting their indispensable value in modern financial markets.

Suggested Citation

  • Andrew Weisman, 2025. "Extracting Market Views from Derivative Prices," Springer Books, in: Frank J. Fabozzi & Marielle de Jong (ed.), Derivatives Applications in Asset Management, chapter 0, pages 193-217, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-86354-7_11
    DOI: 10.1007/978-3-031-86354-7_11
    as

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