August 2004
Beginner to intermediate
248 pages
8h 6m
English
book
Derivatives Demystified: A Step-by-Step Guide to Forwards, Futures, Swaps and Options
by Andrew M. Chisholm
Content preview from Derivatives Demystified: A Step-by-Step Guide to Forwards, Futures, Swaps and OptionsBecome an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
O’Reilly covers everything we've got, with content to help us build a world-class technology community, upgrade the capabilities and competencies of our teams, and improve overall team performance as well as their engagement.I wanted to learn C and C++, but it didn't click for me until I picked up an O'Reilly book. When I went on the O’Reilly platform, I was astonished to find all the books there, plus live events and sandboxes so you could play around with the technology.I’ve been on the O’Reilly platform for more than eight years. I use a couple of learning platforms, but I'm on O'Reilly more than anybody else. When you're there, you start learning. I'm never disappointed.I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.
Chapter 5. Interest Rate and Equity Futures
INTRODUCTION
In 1981, Chicago Mercantile Exchange (CME) introduced the Eurodollar futures contract. It is widely used by banks and other financial institutions to hedge against changes in funding and investment rates. It is also used by traders who wish to anticipate and profit from increases or reductions in short-term US dollar interest rates. In Europe, the futures contract on short-term deposits in euros (the new single currency) traded on LIFFE has also proved to be extremely popular. In 2003 a total of 137 692 241 contracts were traded, up by 30% from 2002.
The Eurodollar futures broke new ground because it was designed to be settled in cash rather than through the physical delivery of a commodity or financial asset. This technique has now been adopted for a wide range of contracts on exchanges around the world. It is used in equity index futures, so that it is now possible to profit from or hedge against changes in the level of major stock market indices without ever actually buying or selling the underlying shares. This helps to reduce transaction costs and allows traders to take a position in equities at a fraction of what it would cost to buy and sell the underlying shares.
INTEREST RATE FUTURES
The contract specification for the three-month Eurodollar interest rate futures traded on CME is set out in Table 5.1. Eurodollars are simply time deposits in US dollars held in commercial banks outside the USA. The bulk of the market is ...
Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
and much more.
Read now
Unlock full access
More than 5,000 organizations count on O’Reilly
O’Reilly covers everything we've got, with content to help us build a world-class technology community, upgrade the capabilities and competencies of our teams, and improve overall team performance as well as their engagement.Julian F.
I wanted to learn C and C++, but it didn't click for me until I picked up an O'Reilly book. When I went on the O’Reilly platform, I was astonished to find all the books there, plus live events and sandboxes so you could play around with the technology.Addison B.
I’ve been on the O’Reilly platform for more than eight years. I use a couple of learning platforms, but I'm on O'Reilly more than anybody else. When you're there, you start learning. I'm never disappointed.Amir M.
I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.