Topic 6 tutorial questions – STIR futures
• How far into the future does the CME Group offer Eurodollar contracts?
• 3 months
• Quarterly for a year
• Roughly 10 years
• Monthly for a year
• What is the Eurodollar contract’s futures price when three-month LIBOR yield = 1.19%?
• 101.19
• 98.89
• 98.81
• 90.19
• Eurodollar futures are:
• Cash settled
• Physically settled
• Netted and no principal exchanged
• Always rolled over
• When spreading futures contracts, the trader is
• Long different expiration months
• Short different expiration months
• Simultaneously short and long different expiration months
• If the Mar’20 Eurodollar contract is 98.48 and Mar’21 is 98.76. (see slide 4 from lecture) The Mar ‘20-Mar ‘21 calendar spread is?
• +28 bp
• – 28 bp
• +72 bp
• If your view was no more Fed easing i.e. interest rates stay the same in 2020 & 2021 how should you trade that spread (in Q5) to make money?
• Sell the spread by doing a flattening trade
• Buy the spread by doing a flattening trade
• Sell the spread by doing a steepening trade
• Buy the spread by doing a steepening trade
• A strip hedge of Eurodollars is:
• A single Eurodollar futures contract used to hedge a 30-year loan
• A succession of Eurodollar futures contracts used to hedge individual successive 90 day reset dates on a variable loan
• Is used primarily for hedging fixed rate loans
• Packs and bundles are pre-packaged strips of Eurodollar futures contracts
• True
• False
• Below is a chart of the EDH0 – EDH1 spread (as of Nov’19)
Describe the recent spread movement from September ‘19 compared to the previous 9 months.
• What has happened to 3-month ICE LIBOR over the Dec’18 – Oct’19 period? See chart below:
Explain what the impact on the STIR futures in the Eurodollars would have been over those 10 months.
Bonus question:
Screenshot 1
Screenshot 2
• What does the contract code EDZ0 stand for and what does it represent if you bought the contract?
• What was the price of EDZ0 in the first table (20/08/19) vs the second table (9/11/20)?
• If you bought 100 contracts of EDZ0 in 20th Aug’19 and sold them 9th Nov’20, how much would you make or lose?