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STIR Futures: Trading Euribor and Eurodollar futures by Stephen Aikin

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Introduction

Most people are only aware of interest rate changes when they make the newspaper or television headlines, but interest rates are moving all the time. They are driven by the supply and demand of money being borrowed and lent in the money markets. STIR futures are one of the key financial derivatives in this market.

STIR futures first appeared in the 1980s as the Eurodollar contract, based on US interest rate deposits traded on the Chicago Mercantile Exchange (CME). CME’s success encouraged European emulation, resulting in the formation of the London International Financial Futures Exchange (now NYSE Liffe but referred to as Liffe in the text) in the early eighties and the creation of the Short Sterling (UK rates), Euromark (German ...

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