New Techniques to Extract Market Expectations from Financial Instruments

49 Pages Posted: 15 Jul 2000 Last revised: 23 Jan 2022

See all articles by Paul Soderlind

Paul Soderlind

affiliation not provided to SSRN

Paul Söderlind

University of St. Gallen

Lars E. O. Svensson

Stockholm School of Economics; Stockholm University - Institute for International Economic Studies (IIES); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: January 1997

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 interest rates, so as to extract expected future time-paths. Very recently only the means but the whole (risk neutral) probability distribution from a set of option prices.

Suggested Citation

Soderlind, Paul and Söderlind, Paul and Svensson, Lars E.O., New Techniques to Extract Market Expectations from Financial Instruments (January 1997). NBER Working Paper No. w5877, Available at SSRN: https://ssrn.com/abstract=225661

Paul Soderlind (Contact Author)

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Paul Söderlind (Contact Author)

University of St. Gallen ( email )

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Lars E.O. Svensson

Stockholm School of Economics ( email )

PO Box 6501
Stockholm, 11383
Sweden

HOME PAGE: http://larseosvensson.se

Stockholm University - Institute for International Economic Studies (IIES) ( email )

Stockholm, SE-10691
Sweden

National Bureau of Economic Research (NBER)

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United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom