Extracting market expectations from option prices

Release date
01/03/2002
Reference
Vol. 65. No. 1. March 2002
Author
Aron Gereben
Indicators of market expectations based on option prices are gaining popularity among central banks. The Reserve Bank recently began to use these indicators in financial stability and monetary policy analysis. This article provides a non-technical overview of these techniques and highlights how they might be used, through examples.