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elearning > Short term interest rate futures

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Learn about the following:

How these contracts work and their specifications. Simple hedges with these contracts. Simple trades with these contracts. How futures are related to swaps through arbitrage.

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Course Summary

stirs menustirs explainedstirs hedging

stirs specificationsstirs arbitragestirs calculations

  • 40 minutes
  • 8 question multiple choice test
  • How these contracts work and their specifications
  • Simple hedges with these contracts
  • Simple trades with these contracts
  • How futures are related to swaps through arbitrage

Short term interest rate futures - the details

1. Short term interest rate contracts

  • The Eurodollar contract
  • Implied forward rate
  • Buying and selling
  • Tick value
  • Gains and losses from an open position

2. Hedging use

  • Borrowing cash in the future
  • Example, hedging with futures
  • Outcomes if interest rates rise or fall
  • Taking risk: example, a spread trade
  • Outcomes from a change in the futures price
  • The 3 month Euribor contract
  • The short sterling contract

3. Arbitrage

  • Using a “strip” of futures to hedge forward Libor
  • Example, calculating the 1 year swap rate
  • How futures and swaps can be arbitraged

4. Summary

  • Self test no results or score retained

5. Test

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