LOS f: Describe the characteristics of the following types of futures contracts: Treasury bill, Eurodollar, Treasury bond, stock index, and currency.

Trading in foreign currency forwards is far larger than the trading in futures. For example, with international trade, businesses can hedge against adverse currency fluctuations. But each business arrangement is unique, and most require the flexibility of a forward, whose terms are not standardized, that meets their special needs.

The long position in a Eurodollar contract gains value when LIBOR decreases. Price quotes on Eurodollar futures are calculated as 100 minus annualized 90-day LIBOR in percent. A change in 90-day LIBOR of 0.01% represents a $25 change in value on a $1 million Eurodollar futures contract. If LIBOR decreases from 3.64% to 3.58%, the contract price increases six ticks from 96.36 to 96.42, so the long position gains 6 × $25 = $150.

Treasury bond futures that have a face value of $100,000 are quoted as a percent of face value with fractions measured in 1/32nds. A bond futures quote of 102-16 represents 102 16/32, or 102.5% of $100,000, which is $102,500.

Currency futures contracts are set in units of the foreign currency and stated as USD/unit.

In the U.S., futures contracts for foreign currencies have a contract size fixed in foreign currency units (e.g. 125,000 Euros) and are priced in dollars per foreign currency unit (e.g. $0.08341 per Peso).

The delivery price for Treasury bonds under the contract is multiplied by the conversion factor for the bond the short chooses to deliver. The other statements are true.