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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]

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Chap 6

  • 2. Day Count Conventions in the U.S. (Page 129) Actual/360 Money Market Instruments: 30/360 Corporate Bonds: Actual/Actual (in period) Treasury Bonds:
  • 3.
  • 4.
  • 5.
  • 6.
  • 7.
  • 8.
  • 9.
  • 10.
  • 11. Example 97.42 Dec 21 …… …… . 96.98 Nov 3 97.23 Nov 2 97.12 Nov 1 Quote Date
  • 12.
  • 13.
  • 14.
  • 15.
  • 16. Forward Rates and Eurodollar Futures continued
  • 17. 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
  • 18.
  • 19.
  • 20.
  • 21.
  • 22. 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
  • 23.
  • 24.
  • 25.