tikfed

pfcfaataf Wrote:
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> eurodollar future is like short-term zero bond
> with future settlement.
>
> future settlement means you dont have to pay
> anything for it now (except margin of course)
>
> long futures interest rate risk is equal to int.
> risk of long zero bond.
>
> rates go down, future price goes up, you earn
>
> your original position: long floater, rates go
> down, you get smaller coupon
>
> therefore to hedge it you go long futures


Thanks A LOT. Nice, simple, straight to the point explanation.

Thanks