Methods and Systems for Interest Rate Prediction

Abstract

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 computer-implemented method for predicting interest rates, comprising the steps of:
 electronically receiving data describing one or more Fed fund futures rates;   electronically adjusting said data describing said one or more Fed fund futures rates to obtain adjusted data regarding said one or more Fed fund futures rates; and   electronically determining data regarding one or more expected Fed fund target rates, wherein an expected rate is determined for each of one or more future Fed meetings contemplated and said data regarding said one or more expected target rates is consistent with said adjusted data regarding said one or more Fed fund futures rates.   
     
     
         2 . A method as in  claim 1 , wherein said step of electronically adjusting said data describing said one or more Fed fund futures rates accounts for an estimated interest rate premium. 
     
     
         3 . A method as in  claim 2 , wherein said estimated interest rate premium is based on an assumption of a constant risk premium per unit of time. 
     
     
         4 . A method as in  claim 2 , wherein said estimated interest rate premium is based on one or more market prices. 
     
     
         5 . A method as in  claim 1 , wherein said one or more Fed fund futures rates are limited to a time period not exceeding an expiration month of a pre-determined number of Eurodollar contracts. 
     
     
         6 . A method as in  claim 1 , further comprising electronically receiving data regarding Eurodollar futures. 
     
     
         7 . A method as in  claim 6 ,
 wherein said data regarding said Eurodollar futures comprises data regarding one or more futures rates and one or more futures dates, and   further comprising calculating one or more forward Fed fund to Eurodollar spreads corresponding to one or more Eurodollar futures dates.   
     
     
         8 . A method as in  claim 7 , wherein said step of calculating forward Fed fund to Eurodollar spreads corresponding to Eurodollar futures dates comprises approximating a forward spread. 
     
     
         9 . A method as in  claim 8 , wherein said approximating comprises subtracting an average Fed funds rate over a Eurodollar period from a risk-adjusted Eurodollar rate over said period. 
     
     
         10 . A method as in  claim 8 , wherein said step of calculating forward Fed fund to Eurodollar spreads corresponding to Eurodollar futures dates further comprises calculating 3-month basis swap data.