What is a Eurodollar contract?
What is a Eurodollar contract?
A Eurodollar future is a cash settled futures contract whose price moves in response to the LIBOR interest rate. Eurodollar futures are a way for companies and banks to lock in an interest rate today, for money they intend to borrow or lend in the future.
How does a Eurodollar futures contract work?
Eurodollar futures are a LIBOR-based derivative, reflecting the London Interbank Offered Rate for a 3-month $1 million offshore deposit. For example, if an investor buys one eurodollar futures contract at $96.00 and the price rises to $96.02, this corresponds to a lower implied settlement of LIBOR at 3.98%.
What is Euro FX futures?
Euro FX futures allow traders to assess value against the U.S. dollar, as well as the opportunity to address risk from currency fluctuations in other foreign trade markets.
What is the importance of Euro dollar market?
The Euro-dollar market attracts funds by offering high rates of interest, greater flexibility of maturities and a wider range of investment qualities. Though Euro-dollar market is wholly unofficial in character, it has become an indispensable part of the international monetary system.
What is an interest rate futures contract?
An interest rate future is a futures contract with an underlying instrument that pays interest. The contract is an agreement between the buyer and seller for the future delivery of any interest-bearing asset.
What rate can the company lock in by using the Eurodollar futures contract?
The December Eurodollar futures contract is quoted as 98.40 and a company plans to borrow $8 million for three months starting in December at LIBOR plus 0.5%. (a) What rate can then company lock in by using the Eurodollar futures contract?…Problem 6.10.
| Bond | Price | Conversion Factor |
|---|---|---|
| 4 | 144-02 | 1.4026 |
How does a currency futures contract work?
An FX futures or currency futures contract is a type of foreign exchange derivative, where a buyer agrees to buy one currency in exchange for another currency, at a future date and at a current agreed upon price by both buyer and seller at the moment of creating the contract.
What is the difference between futures and forex?
The forex is an over-the-counter (OTC) market and futures are traded on formal exchanges. Futures contracts have finite expiration dates, while forex pairs may be traded into perpetuity. Spot forex values are determined with respect to other currencies, while futures products are independently priced.
What is the purpose of Eurodollar futures and options?
Introduction to Eurodollar Futures and Options A benchmark for investors globally, Eurodollar futures provide a valuable, cost-effective tool for hedging fluctuations in short-term U.S. dollar interest rates. Eurodollars are U.S. dollars deposited in commercial banks outside the United States.
How much does the American Express Centurion Card cost?
Each card has an annual fee of $2,500, and you’ll also pay an initiation fee of $7,500. Your ability to keep the card will be evaluated by American Express each year since it allows a number of exclusive benefits.
What kind of card is the Centurion Card?
The Centurion card is an invitation-only card that caters to a more affluent customer segment. Dedicated concierge and travel agent.
What are the strike prices for Eurodollar futures?
Strike prices for the first 8 option (4 serial and 4 quarterly) months will be listed in intervals of 6.25 basis points (0.0625 price points) in a range of 150 basis points above and 150 basis points below the strike price closest to the previous daily settlement price for the underlying futures contract.