While there are several practical considerations regarding how to derive market-based probabilities from financial prices, the discussion here is confined to a theoretical analysis that assumes no impediment to obtaining the market-based probabilities.
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Working Paper
On the Use of Market-Based Probabilities for Policy Decisions
December 2015
WP 15-44 — This paper seeks to delimit the conditions so that market-based probabilities provide all the information required by the policymaker to arrive at the best decision possible.
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