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optiix

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tT
发表于 2011-7-13 15:52 | 只看该作者

FRA vs Short term interest rate futures

contract, interest, statements, long
FRA is a forward contract, the long in the contract profits when interest rates rise.

Short-Term interest rate futures contract is a futures contract, the long in the contract profits when interest rates fall.

Are the above two statements correct?
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scr879

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2#
发表于 2011-7-13 15:52 | 只看该作者
I don't think the second one's correct. Long on BOND futures benefits when interest rates fall.

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Beatnik

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3#
发表于 2011-7-13 15:52 | 只看该作者
That is what I thought at first as well.

But on CFAI book 6, page 66, under the heading Short-Term Interest Rate Futures Contracts they have:

- Treasury Bill Futures
- Eurodollar Futures

Both have the same pay off formula, and in both cases the long profits when interest rates fall.

Is this correct?

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MythosHF

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4#
发表于 2011-7-13 15:52 | 只看该作者
Eurodollar futures are meant to look like bond futures. That is, the long profits when interest rates go down.

T-Bill futures are decidedly different because there is a deliverable (a T-Bill). A Eurodollar future is not deliverable but is cash settled. Among other things, this gives the T-Bill contract convexity but there is no convexity in the ED futures.

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