When it comes to other countries, I have understood there are ways to calculate this probability using options even, but that the most standard way of doing this is by using overnight index swaps (OIS) (Canada as an example: https://www.m-x.ca/nego_cotes_en.php?symbol=OIS*)
This question had been asked before on this forum (https://www.analystforum.com/forums/investments/91345687), but there was no definitive answer I think, and the answers didn’t mention using OIS. Does someone know how to go about it?
It’s essentially the same process. The Canadian OIS futures, like Fed Funds futures, are quoted as 1 - the Rate. So, you have the probability weighted Canadian OIS rate at each maturity date. If you have the base OIS rate, you can then derive the probability of rates using simple math.
One possible difference is that Fed Funds futures are quoted as the average of the Fed Funds rate over the month. That’s why CME has some calculation related to the number of days N. I don’t know if Canadian OIS is quoted as a forward rate (like Eurodollar or Euribor futures) or as an average rate (like Fed Funds futures). You just have to adjust the calculation depending on that.
So, you understand what the futures are trading on, right? It is the OIS rate on that date. So, the futures prices show the weighted probabilities of the spot OIS rate.
this is somewhat related, would you even attempt to get OIS rates using fed fund futures ? I am looking to build some yield curves but do not have access to OIS swaps (nor EONIA or SONIA) as it seems to only be available through vendors. Curves off LIBOR have issues which have been made obvious after the crisis so i am looking to find a way to make it as realistic as possible.