Markets are pricing

G'day,

When the journos in the newspaper say "the markets are pricing 93.56798% of a rate cut next week" or "the markets are pricing Obama's win" - I've always wanted to know how exactly they arrived to the numbers? Do they base the percentages, somehow, on changes in futures price movements?

Done googling, found nothing. I'll appreciate someone knowledgeable pointing to an article or an academic paper that explains how the "markets are pricing ...".

I believe when they say 'the markets are pricing a 67% chance of Obama winning' they are looking at the odds offered by sports books and calculating the % chance accordingly.

With regards to interest rates, the comments are based on the 30 day interbank cash rate futures.

Have a look around the website below, it shows the formula in one of the links.

http://www.asx.com.au/sfe/targetratetracker.htm