The Eurodollar Futures and Options Handbook
by Galen Burghardt
The Eurodollar Futures and Options Handbook
- Cover Page
- The Eurodollar Futures and Options Handbook
- Copyright Page
- Contents
- List of Exhibits
- List of Examples
- List of Equations
- List of Contributors
- Foreword
- Part One The Emergence of the Eurodollar Market
- Chapter 1 The Emergence of the Eurodollar Market
- Part Two Building Blocks: Eurodollar Futures
- Chapter 2 The Eurodollar Time Deposit
- Chapter 3 The Eurodollar Futures Contract
- Chapter 4 Forward and Futures Interest Rates
- Deriving a Forward Rate from Two Term Deposit Rates
- Locking an Effective Forward Lending Rate Using Eurodollar Futures
- Important Differences between Forward and Futures Markets
- Determining the Fair Value of a Eurodollar Futures Contract
- Richness and Cheapness
- Forward Rates Are Break-Even Rates
- Yield Curve Trades
- Finding the Forward Term Deposit Curve Implied by Today’s Futures Rates
- Chapter 5 Hedging with Eurodollar Futures
- Chapter 6 Pricing and Hedging a Swap with Eurodollar Futures
- Fixed/Floating Interest Rate Swaps
- Approaches to Pricing and Hedging Interest Rate Swaps
- Pricing a Swap Using the Cash Flow Method
- Hedging a Swap Using the Cash Flow Method
- Pricing a Swap Using the Hypothetical Securities Method
- Hedging a Swap Using the Hypothetical Securities Method
- Pricing and Hedging Off-the-Market Swaps
- Convexity Differences between Forward and Futures Rates
- Comparing Three Yield Curves: Forward, Zero Coupon, and Par Coupon
- Part Three Eurodollar Futures Applications
- Convexity Bias (Chapters 7 through 10)
- Term TED Spreads (Chapters 11 and 12)
- Hedging and Trading with Eurodollar Stacks, Packs, and Bundles (Chapter 13)
- Hedging Extension Risk in Callable Agency Notes (Chapter 14)
- Opportunities in the S&P Calendar Roll (Chapter 15)
- Trading the Turn (Chapters 16 and 17)
- Chapter 7 The Convexity Bias in Eurodollar Futures
- Galen Burghardt and William Hoskins Research note originally released September 16, 1994
- Synopsis
- Introduction
- Interest Rate Swaps and Eurodollar Futures
- How Much Is the Convexity Bias Worth?
- Reconciling the Difference between a Swap and a Eurodollar Futures Contract
- A Workable Rule of Thumb
- The Importance of the Bias for Pricing Term Swaps
- The Market’s Experience with the Convexity Bias
- Now What?
- APPENDIX A Deriving the Rule of Thumb
- APPENDIX B Calculating Eurodollar Strip Rates and Implied Swap Rates
- Chapter 8 Convexity Bias Report Card
- Chapter 9 New Convexity Bias Series
- Chapter 10 Convexity Bias: An Update
- Chapter 11 Measuring and Trading Term TED Spreads
- Galen Burghardt, William Hoskins, and Susan Kirshner Research note originally released July 26, 1995
- Synopsis
- TED Spreads
- Two Kinds of Term TED Spreads
- How Do These Rates Compare?
- How Directional Is the Spread?
- Trading the Spreads
- What to Do with the Stub
- Forward Term TED Spreads
- Term TED Spreads and Swap Spreads
- APPENDIX Complete Operating Instructions for Calculating Term TED Spreads and Hedge Ratios
- Chapter 12 TED Spreads: An Update
- Chapter 13 Hedging and Trading with Eurodollar Stacks, Packs, and Bundles
- Galen Burghardt, George Panos, and Fred Sturm Research note originally released December 15, 1999
- Synopsis
- Hedging and Trading with Eurodollar Stacks, Packs, and Bundles
- Basics: Dates, Names, Packs, Bundles, and Quotes
- Quote Practices 1: Ticks
- Quote Practices 2: Use Price Level for Individual Contracts
- Quote Practices 3: Use Price Changes for Packs and Bundles
- Unpacking Packs, Unbundling Bundles
- Hedging with Stacks, Packs, and Bundles
- Trading Curve TEDs
- Chapter 14 Hedging Extension and Compression Risk in Callable Agency Notes
- Galen Burghardt and William Hoskins Research note originally released March 24, 1995
- Synopsis
- Introduction
- Structuring a Hedge
- Example of Hedging a 10-Year, 8.5 Percent Coupon Note, Callable in 5 Years
- The Costs and Risks of Delta Hedging
- The Yield Spread between Agencies and Treasurys
- What If There Is Little or No Call Protection?
- Sometimes Strips of Eurodollar Futures Provide Better Hedges
- Chapter 15 Opportunities in the S&P 500 Calendar Roll
- Chapter 16 Trading the Turn: 1993
- Chapter 17 The Turn: An Update
- Convexity Bias (Chapters 7 through 10)
- Part Four Building Blocks: Eurodollar Options
- Chapter 18 The Eurodollar Option Contract
- Chapter 19 Price, Volatility, and Risk Parameter Conventions
- Chapter 20 Caps, Floors, and Eurodollar Options
- Chapter 21 Structure and Patterns of Eurodollar Rate Volatility
- Chapter 22 Practical Considerations
- Part Five Eurodollar Option Applications
- Trading with Serial and Mid-curve Eurodollar Options (Chapters 23 and 24)
- What Happens to Eurodollar Volatility when Rates Fall? (Chapters 25 and 26)
- Hedging Convexity Bias (Chapter 27)
- Chapter 23 Trading with Serial and Mid-curve Eurodollar Options
- Galen Burghardt and Scott Lyden Research note originally released June 22, 1998
- Synopsis
- The Full Constellation of Eurodollar Options
- The Beauty of This Design
- The Eurodollar Strategy Triangle
- Different Volatility Horizons
- Mid-curve Options versus OTC Treasury Options
- Some Things to Keep in Mind
- LIFFE’s Options
- Chapter 24 Serial and Mid-curve Options: An Update
- Chapter 25 What Happens to Eurodollar Volatility When Rates Fall?
- Chapter 26 Eurodollar Volatility: An Update
- Chapter 27 Hedging Convexity Bias
- Glossary
- Index
- About the Author
- Footnotes
THE EURODOLLAR FUTURES AND OPTIONS HANDBOOK
GALEN BURGHARDT
Director of Research, Carr Futures
Adjunct Professor of Finance,
University of Chicago Graduate School of Business
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