eurodollar-futures-contract

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

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...

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...