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...

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...

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...