Interest Rate Futures Question from Hull, 8eCalculate interest rate swap curve from Eurodollar futures pricePricing an interest rate swap using Eurodollar futuresLong Forward Rate Agreement, short Eurodollar futuresCalculating the interest rate from a EuroDollar Futues contractHedging with interest rate futures, different durationHow to trade interest rate futures calendar spread?How does one calculate the Libor future contract price?Basic Question on rate hikes priced in through Eurodollar futures (EDF)Hedging treasury bond with Eurodollar futuresInterview question on interest rate spread trade
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Interest Rate Futures Question from Hull, 8e
Calculate interest rate swap curve from Eurodollar futures pricePricing an interest rate swap using Eurodollar futuresLong Forward Rate Agreement, short Eurodollar futuresCalculating the interest rate from a EuroDollar Futues contractHedging with interest rate futures, different durationHow to trade interest rate futures calendar spread?How does one calculate the Libor future contract price?Basic Question on rate hikes priced in through Eurodollar futures (EDF)Hedging treasury bond with Eurodollar futuresInterview question on interest rate spread trade
$begingroup$
There is this question 6.16 in Hull, 8e:
Suppose that it is February 20 and a treasurer realizes that on July 17 the company will have to issue $5 million of commercial paper with a maturity of 180 days. If the paper were issued today, the company would realize $4,820,000. (In other words, the company would receive $4,820,000 for its paper and have to redeem it at $5,000,000 in 180 days’ time.) The September Eurodollar futures price is quoted as 92.00. How should the treasurer hedge the company’s exposure?
The solution says 9.84 contracts should be shorted to achieve the intended outcome and arrives at this number as follows:
4,820,000*2/980,0000
I don't get where this 980,000 comes from?
fixed-income futures hedging eurodollars
asked yesterday
user523170user523170
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There is this question 6.16 in Hull, 8e:
Suppose that it is February 20 and a treasurer realizes that on July 17 the company will have to issue $5 million of commercial paper with a maturity of 180 days. If the paper were issued today, the company would realize $4,820,000. (In other words, the company would receive $4,820,000 for its paper and have to redeem it at $5,000,000 in 180 days’ time.) The September Eurodollar futures price is quoted as 92.00. How should the treasurer hedge the company’s exposure?
The solution says 9.84 contracts should be shorted to achieve the intended outcome and arrives at this number as follows:
4,820,000*2/980,0000
I don't get where this 980,000 comes from?
fixed-income futures hedging eurodollars
asked yesterday
user523170user523170
82
New contributor
user523170 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
$endgroup$
add a comment |
$begingroup$
There is this question 6.16 in Hull, 8e:
Suppose that it is February 20 and a treasurer realizes that on July 17 the company will have to issue $5 million of commercial paper with a maturity of 180 days. If the paper were issued today, the company would realize $4,820,000. (In other words, the company would receive $4,820,000 for its paper and have to redeem it at $5,000,000 in 180 days’ time.) The September Eurodollar futures price is quoted as 92.00. How should the treasurer hedge the company’s exposure?
The solution says 9.84 contracts should be shorted to achieve the intended outcome and arrives at this number as follows:
4,820,000*2/980,0000
I don't get where this 980,000 comes from?
fixed-income futures hedging eurodollars
asked yesterday
user523170user523170
82
New contributor
user523170 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
$endgroup$
There is this question 6.16 in Hull, 8e:
Suppose that it is February 20 and a treasurer realizes that on July 17 the company will have to issue $5 million of commercial paper with a maturity of 180 days. If the paper were issued today, the company would realize $4,820,000. (In other words, the company would receive $4,820,000 for its paper and have to redeem it at $5,000,000 in 180 days’ time.) The September Eurodollar futures price is quoted as 92.00. How should the treasurer hedge the company’s exposure?
The solution says 9.84 contracts should be shorted to achieve the intended outcome and arrives at this number as follows:
4,820,000*2/980,0000
I don't get where this 980,000 comes from?
fixed-income futures hedging eurodollars
fixed-income futures hedging eurodollars
asked yesterday
user523170user523170
82
New contributor
user523170 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
asked yesterday
user523170user523170
82
New contributor
user523170 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
asked yesterday
user523170user523170
82
New contributor
user523170 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
asked yesterday
user523170user523170
82
asked yesterday
user523170user523170
82
82
New contributor
user523170 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
New contributor
user523170 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
user523170 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
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add a comment |
1 Answer
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$begingroup$
The future is at 92, so the interest rate is 8% per year (!the good old days!) or 2% a quarter. Two percent interest on one million is 20,000. So one future covers the interest on 980,000 initial amount and allows you to repay 1,000,000 at maturity 3 months later.
You initially borrow 4,820,000 so you need 4,820,000/980,000 futures (for a three month loan). But it is a 6 month loan, so you need twice as much to pay the interest, i.e. 4,820,000*2/980,000
answered yesterday
Alex CAlex C
6,55411123
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$begingroup$
The future is at 92, so the interest rate is 8% per year (!the good old days!) or 2% a quarter. Two percent interest on one million is 20,000. So one future covers the interest on 980,000 initial amount and allows you to repay 1,000,000 at maturity 3 months later.
You initially borrow 4,820,000 so you need 4,820,000/980,000 futures (for a three month loan). But it is a 6 month loan, so you need twice as much to pay the interest, i.e. 4,820,000*2/980,000
answered yesterday
Alex CAlex C
6,55411123
$endgroup$
add a comment |
$begingroup$
The future is at 92, so the interest rate is 8% per year (!the good old days!) or 2% a quarter. Two percent interest on one million is 20,000. So one future covers the interest on 980,000 initial amount and allows you to repay 1,000,000 at maturity 3 months later.
You initially borrow 4,820,000 so you need 4,820,000/980,000 futures (for a three month loan). But it is a 6 month loan, so you need twice as much to pay the interest, i.e. 4,820,000*2/980,000
answered yesterday
Alex CAlex C
6,55411123
$endgroup$
add a comment |
$begingroup$
The future is at 92, so the interest rate is 8% per year (!the good old days!) or 2% a quarter. Two percent interest on one million is 20,000. So one future covers the interest on 980,000 initial amount and allows you to repay 1,000,000 at maturity 3 months later.
You initially borrow 4,820,000 so you need 4,820,000/980,000 futures (for a three month loan). But it is a 6 month loan, so you need twice as much to pay the interest, i.e. 4,820,000*2/980,000
answered yesterday
Alex CAlex C
6,55411123
$endgroup$
The future is at 92, so the interest rate is 8% per year (!the good old days!) or 2% a quarter. Two percent interest on one million is 20,000. So one future covers the interest on 980,000 initial amount and allows you to repay 1,000,000 at maturity 3 months later.
You initially borrow 4,820,000 so you need 4,820,000/980,000 futures (for a three month loan). But it is a 6 month loan, so you need twice as much to pay the interest, i.e. 4,820,000*2/980,000
answered yesterday
Alex CAlex C
6,55411123
edited yesterday
answered yesterday
Alex CAlex C
6,55411123
answered yesterday
Alex CAlex C
6,55411123
answered yesterday
Alex CAlex C
6,55411123
6,55411123
add a comment |
add a comment |
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