Hedging with Eurodollar futures

[itsyourz]

EXAMPLE 12.7: FRM EXAM 1999—QUESTION 61
If all spot interest rates are increased by one basis point, a value of a portfolio
of swaps will increase by $1,100. How many Eurodollar futures contracts
are needed to hedge the portfolio?
a. 44
b. 22
c. 11
d. 1,100

a is the answer, which is from 1100/25

i dont understand how 25 is calculated, nothing is given though,

i know eurodollar futures' duration is always 0.25 years

but i think the price should have been given , am i wrong?

 

[David Harper CFA FRM]

Hi suk,

Please see helpful post by Bruno or my brief on this.
The Eurodollar contract, by its design, gives a gain of $25 per 1 basis point (i.e., the long profits by $25/basis point)

David