Study Notes: Interest Rate Futures

Chapter 19. Interest Rate Futures Study Notes contain 20 pages covering the following learning objectives:

* Identify the most commonly used day count conventions, describe the markets that each one is typically used in, and apply each to an interest calculation.
* Calculate the conversion of a discount rate to a price for a US Treasury bill.
* Differentiate between the clean and dirty price for a US Treasury bond; calculate the accrued interest and dirty price on a US Treasury bond.
* Explain and calculate a US Treasury bond futures contract conversion factor.
* Calculate the cost of delivering a bond into a Treasury bond futures contract.
* Describe the impact of the level and shape of the yield curve on the cheapest-to-deliver Treasury bond decision.
* Calculate the theoretical futures price for a Treasury bond futures contract.
* Calculate the final contract price on a Eurodollar futures contract, and compare Eurodollar futures to FRAs.
* 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 duration-based hedging strategy using interest rate futures.
* Explain the limitations of using a duration-based hedging strategy.

After reviewing the notes, you will be able to apply what you learned with practice questions.

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