R19.P1.T3.Hull-Chapter 6- Final Contract Price on Euro$ Futures Contract

[gargi.adhikari]

Hi,
In reference to R19.P1.T3.Hull-Chapter 6- Final Contract Price on Euro$ Futures Contract:-
The Contract Price is calculated as = 10,000[ 100 - .25 (100- Quote) ] for Gain/Loss per 1 bps= 25
I do understand intuitively that the factor 10,000 and the .25 are related to the Gain/Loss per 1 bps= 25
but am not able to logically derive this formula...can someone help...? Thanks much for stopping by...

 

[bpdulog]

Hi,
In reference to R19.P1.T3.Hull-Chapter 6- Final Contract Price on Euro$ Futures Contract:-
The Contract Price is calculated as = 10,000[ 100 - .25 (100- Quote) ] for Gain/Loss per 1 bps= 25
I do understand intuitively that the factor 10,000 and the .25 are related to the Gain/Loss per 1 bps= 25
but am not able to logically derive this formula...can someone help...? Thanks much for stopping by...

There are 10,000 bps in 1% and each 1bps move in a Euro$ approximates a $25 change in the price of a Euro$ contract. Does that help?