Chap 6

Interest Rate Futures Chapter 6

Day Count Conventions in the U.S. (Page 129) Actual/360 Money Market Instruments: 30/360 Corporate Bonds: Actual/Actual (in period) Treasury Bonds:

Treasury Bond Price Quotes in the U.S ,[object Object],[object Object]

Treasury Bond Futures Pages 133-137 ,[object Object],[object Object]

Example ,[object Object],[object Object],[object Object],[object Object],[object Object]

Conversion Factor ,[object Object]

CBOT T-Bonds & T-Notes ,[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object],Eurodollar Futures (Page 137-142)

Eurodollar Futures continued ,[object Object],[object Object]

Example ,[object Object],[object Object],[object Object],[object Object]

Example 97.42 Dec 21 …… …… . 96.98 Nov 3 97.23 Nov 2 97.12 Nov 1 Quote Date

Example continued ,[object Object],[object Object]

Formula for Contract Value (page 138) ,[object Object]

Forward Rates and Eurodollar Futures (Page 139-142) ,[object Object],[object Object]

There are Two Reasons ,[object Object],[object Object]

Forward Rates and Eurodollar Futures continued

Convexity Adjustment when  =0.012 (Table 6.3, page 141) 73.8 10 47.5 8 27.0 6 12.2 4 3.2 2 Convexity Adjustment (bps) Maturity of Futures

Extending the LIBOR Zero Curve ,[object Object],[object Object]

Example ,[object Object],[object Object]

Duration Matching ,[object Object],[object Object]

Use of Eurodollar Futures ,[object Object],[object Object]

Duration-Based Hedge Ratio Duration of portfolio at hedge maturity D P Value of portfolio being hedged P Duration of asset underlying futures at maturity D F Contract price for interest rate futures F C

Example ,[object Object],[object Object],[object Object]

Limitations of Duration-Based Hedging ,[object Object],[object Object]

GAP Management (Business Snapshot 6.3) ,[object Object],[object Object],[object Object]

Chap 6

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Chap 6