1. J

    Eurodollar and its convexity

    Hi, This is the practice: I don’t understand why it says “both position have positive convexities”. It confused me so much that why EDF has the positive convexity? Isn’t it a linear product? Thanks
  2. Nicole Seaman

    YouTube T3-29: Hedge interest rate exposure with Eurodollar futures contract

    If we plan to borrow in the future, our exposure (risk) is to higher rates and the trade is a SHORT position in the Eurodollar (ED) futures contract (because higher LIBOR corresponds to lower Quote). If we plan to lend (aka, invest) in the future, our risk is lower rates and the trade is a LONG...
  3. Nicole Seaman

    YouTube T3-28: Eurodollar futures contract

    A Eurodollar (ED) futures contract is an interest rate derivative: it references a future three-month LIBOR interest rate. The futures quote is given by Q = 100 - R, where R is LIBOR; for example, a ED futures quote of 97.00 signifies an anticipated 3-month LIBOR of 3.00%. The contract price is...
  4. Nicole Seaman

    P1.T3.721. Eurodollar futures contracts and duration-based hedging (Hull)

    Learning objectives: Calculate the final contract price on a Eurodollar futures contract. Describe and compute the Eurodollar futures contract convexity adjustment. Explain how Eurodollar futures can be used to extend the LIBOR zero curve. Calculate the duration-based hedge ratio and create a...
  5. P

    Eurodollar Futures.

    Hi David, Sorry, but I’ve got another question if you’ve got some spare time, this time relating to Eurodollar futures. No urgency though, it’s more curiosity than anything else. When pricing a future we have a combination of equations depending on the underlying which results in a...