Methods and systems for interest rate prediction
View Patent ↗In one aspect, the invention comprises a computer-implemented method for predicting interest rates, comprising the steps of: electronically receiving data describing one or more Fed fund futures rates; electronically adjusting the data describing the one or more Fed fund futures rates to obtain adjusted data regarding the one or more Fed fund futures rates; and electronically determining data regarding one or more expected Fed fund target rates. In another aspect, the invention comprises a system for predicting interest rates, comprising: one or more processors operable to determine probability distribution data for one or more Eurodollar rates based on Eurodollar futures option data; one or more processors operable to link said probability distribution data for one or more Eurodollar rates to overnight forward Fed funds rate data; and one or more processors operable to link said forward Fed funds rate data to expected Fed funds rate data.
1. A system comprising:
memory operable to store at least one program; and
at least one processor communicatively coupled to the memory, in which the at least one program, when executed by the at least one processor, causes the at least one processor to:
receive from a data source data comprising Eurodollar futures option data and Fed Funds versus LIBOR basis swaps data;
determine probability distribution data for one or more Eurodollar rates based on said Eurodollar futures option data;
determine an overnight forward Fed funds rate based on said probability distribution data for one or more Eurodollar rates and said Fed funds versus LIBOR basis swaps data; and
determine a future Fed funds rate to be set at a future Fed meeting based on said overnight forward Fed funds rate.
2. A system as in claim 1 , wherein said future Fed funds rate is determined further based on an interest rate risk premium.
3. A system as in claim 2 , wherein said interest rate risk premium is based on one or more market prices.
4. A system as in claim 2 , wherein said interest rate risk premium is based on one or more market prices, wherein said one or more market prices is based on an assumption that market expectations of rate changes will die out after a pre-determined number of years.
5. A system as in claim 2 , wherein said interest rate risk premium is assumed to be constant per unit of time.
6. A system as in claim 2 , wherein said interest rate risk premium is estimated from a slope of a Eurodollar futures curve over a pre-determined period of time.
7. A system as in claim 1 , wherein said processor further receives user input of one or more subjective probabilities; and determines one or more terms for one or more of: Fed fund futures, Eurodollar futures, and Eurodollar future options.