Option-Based Forecasts of Federal Reserve Target Rate Changes

William R. Emmons of the Federal Reserve Bank of St. Louis analyzes options on federal funds futures contracts to extract implied probability density functions for future Federal Open Market Committee target rates. The dataset likely contains daily option prices from the Chicago Board of Trade, which introduced these exchange-traded options in 2003. This data provides information about market expectations, including the dispersion and skewness of potential monetary policy actions.

Use Cases

• Extracting implied risk-neutral probability density functions for federal funds target rates based on the method of Carlson, Craig, and Melick (2005).
• Assessing evolving market uncertainty about Federal Reserve monetary policy actions during specific events and episodes.
• Comparing futures-based and options-based forecasts for upcoming FOMC meetings when multiple outcomes are plausible.

Strengths

• Focuses on a specific, policy-relevant financial instrument: options on federal funds futures, introduced in 2003.
• Applies a published methodology (Carlson, Craig, and Melick, 2005) to derive probability forecasts from market data.
• Cross-platform presence on PapersWithCode suggests recognized utility for research in finance and economics.

Limitations

• Critical metadata is missing: specific column names, row count, file format, and last update date are unknown.
• The license is listed as 'closed', restricting access and reuse.
• The dataset description is repeated verbatim across multiple entries, indicating potential metadata duplication rather than independent sourcing.

Provenance

Source

Federal Reserve Bank of St. Louis (author: William R. Emmons). Data likely originates from the Chicago Board of Trade.

Collection Method

Likely collected from exchange-traded options on federal funds futures contracts.

Time Range

Options data available from 2003 onward; underlying futures contracts have been offered since 1988.

Geography

United States (Federal Reserve monetary policy).