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9780071418553
The Eurodollar Futures and Options Handbook / Edition 1 available in Hardcover, eBook
![The Eurodollar Futures and Options Handbook / Edition 1](http://vs-images.bn-web.com/static/redesign/srcs/images/grey-box.png?v11.11.3)
The Eurodollar Futures and Options Handbook / Edition 1
by Galen Burghardt
Galen Burghardt
- ISBN-10:
- 0071418555
- ISBN-13:
- 9780071418553
- Pub. Date:
- 06/23/2003
- Publisher:
- McGraw Hill LLC
- ISBN-10:
- 0071418555
- ISBN-13:
- 9780071418553
- Pub. Date:
- 06/23/2003
- Publisher:
- McGraw Hill LLC
![The Eurodollar Futures and Options Handbook / Edition 1](http://vs-images.bn-web.com/static/redesign/srcs/images/grey-box.png?v11.11.3)
The Eurodollar Futures and Options Handbook / Edition 1
by Galen Burghardt
Galen Burghardt
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Overview
Eurodollar trading volume is exploding, with no end in sight tools phenomenal growth. The Eurodollar Futures and Options Handbook provides traders and investors with the complete range of current research on Eurodollar futures and options, now the most widely traded money market contracts in the world. The only current book on this widely-followed topic, it features chapters written by Eurodollar experts from JP Morgan, Mellon Capital, Merrill Lynch, and other global trading giants, and will quickly become a required reference for all Eurodollar F&O traders and investors.
Product Details
ISBN-13: | 9780071418553 |
---|---|
Publisher: | McGraw Hill LLC |
Publication date: | 06/23/2003 |
Series: | McGraw-Hill Library of Investment and Finance |
Edition description: | First Edition |
Pages: | 350 |
Product dimensions: | 6.20(w) x 9.10(h) x 1.55(d) |
About the Author
Galen Burghardt, Ph.D. is senior vice president and director of research for Carr Futures, adjunct professor of finance at the University of Chicago, and an accomplished author on investing.
Table of Contents
ForewordPart One The Emergence of the Eurodollar MarketChapter 1 The Emergence of the Eurodollar MarketThe Revolution in FinanceThe Futures RevolutionKey Money Market DevelopmentsWhy Eurodollars?Eurodollar FuturesThe Death of CD Futures and the Birth of Eurodollar FuturesThe Market for Interest Rate Derivatives at the Beginning of the 21st CenturyExchange-Traded Money Market Futures and OTC Interest Rate SwapsOptions on Futures, Forward Rates, and SwapsMarkets around the WorldPart Two Building Blocks: Eurodollar FuturesChapter 2 The Eurodollar Time DepositMaturities and SettlementQuotesLIBOR and LIBIDInterest CalculationsChapter 3 The Eurodollar Futures ContractContract SpecificationsContract UnitPrice QuoteTick SizeMinimum FluctuationListed Contract MonthsContract Month SymbolsColor-Coded GridExpiring versus Lead ContractTrading Hours and Mutual OffsetFinal Settlement PriceLast Trading DayValue DatesAdditional Trading FacilitiesInitial and Maintenance Performance BondsVolume and Open InterestOther 3-Month Money Market Futures ContractsChapter 4 Forward and Futures Interest RatesDeriving a Forward Rate from Two Term Deposit RatesLocking an Effective Forward Lending Rate Using Eurodollar FuturesImportant Differences between Forward and Futures MarketsDetermining the Fair Value of a Eurodollar Futures ContractRichness and CheapnessForward Rates Are Break-Even RatesYield Curve TradesFinding the Forward Term Deposit Curve Implied by Today’s Futures RatesChapter 5 Hedging with Eurodollar FuturesThe Tool Is a Eurodollar Futures ContractBasic Hedge AlgebraDeriving Present and Forward Values from Eurodollar Futures RatesCalculating a Forward Value (Terminal Wealth)Calculating a Zero-Coupon Bond Price (Present Value)Hedging or Replicating Forward Cash FlowsForward Valuing the Gain or Loss on the Eurodollar Futures ContractPresent Valuing the Gain or Loss on a FloaterHedging or Replicating Present Values of Cash FlowsCalculating the Price of a Zero-Coupon BondCalculating the Present Value of a Basis PointFinding the Hedge for a Zero-Coupon BondFaster Hedge Ratio Calculations with CalculusPricing and Hedging a Coupon-Bearing BondManaging Hedge RatiosAs Rates Rise or FallAs Time PassesPractical Considerations in Real HedgesThe Stub PeriodDate and Term MismatchesWhole ContractsCredit SpreadsVariable Credit SpreadsChapter 6 Pricing and Hedging a Swap with Eurodollar FuturesFixed/Floating Interest Rate SwapsNotional Principal AmountCash Flows in ArrearsPeriodicitySpot and Forward-Starting SwapsDay-Count Conventions and Swap YieldsApproaches to Pricing and Hedging Interest Rate SwapsCash Flow ApproachHypothetical Security ApproachPricing a Swap Using the Cash Flow MethodHedging a Swap Using the Cash Flow MethodPrimary EffectsSecondary EffectsCalculating Hedge RatiosHedge Ratios Are DynamicPricing a Swap Using the Hypothetical Securities MethodHedging a Swap Using the Hypothetical Securities MethodFloating Rate LiabilityFixed Rate AssetFind the Hedge RatiosPricing and Hedging Off-the-Market SwapsConvexity Differences between Forward and Futures RatesComparing Three Yield Curves: Forward, Zero Coupon, and Par CouponThe Difference between Money Market Rates and Bond YieldsPart Three Eurodollar Futures ApplicationsConvexity 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 FuturesGalen Burghardt and William Hoskins Research note originally released September 16, 1994SynopsisIntroductionInterest Rate Swaps and Eurodollar FuturesA Forward SwapThe Value of a Basis PointEurodollar FuturesReconciling the Difference in Cash Flow DatesHedging the Forward Swap with Eurodollar FuturesThe Other Source of Interest Rate Risk in the Forward SwapInteraction between the Two Sources of RiskTrading the HedgeHow Much Is the Convexity Bias Worth?How Correlated Are the Rates?Estimating the Value of the Convexity BiasCalculating the Value of the BiasReconciling the Difference between a Swap and a Eurodollar Futures ContractHow One Would Pay for the AdvantageTranslating the Advantage into Basis PointsA Workable Rule of ThumbApplying the Rule of ThumbThe Importance of Time to Contract ExpirationThe Cumulative Effect of All This DriftHow Sensitive Are the Estimates to the Assumptions?Practical Considerations in Applying the RuleThe Importance of the Bias for Pricing Term SwapsBiases in Forward Swap RatesThe Market’s Experience with the Convexity BiasNow What?Running a Receive Fixed, Pay Floating Swap BookMarking a Swap Book to MarketVolatility ArbitrageEvaluating Term TED SpreadsAPPENDIX A Deriving the Rule of ThumbAPPENDIX B Calculating Eurodollar Strip Rates and Implied Swap RatesChapter 8 Convexity Bias Report CardGalen Burghardt, William Hoskins, and Niels Johnson Research note originally released April 15, 1997What Is the Convexity Bias?How Have We Done?Convexity Bias GreeksConvexity Bias DeltaConvexity Bias VegaConvexity Bias ThetaChapter 9 New Convexity Bias SeriesGalen Burghardt and Lianyan Liu Research note originally released February 1, 2002Chapter 10 Convexity Bias: An UpdateChapter 11 Measuring and Trading Term TED SpreadsGalen Burghardt, William Hoskins, and Susan Kirshner Research note originally released July 26, 1995SynopsisTED SpreadsSimple TED SpreadsTerm TED SpreadsTwo Kinds of Term TED SpreadsUnweighted Eurodollar Strip Yields versus Treasury YieldsWeighted Eurodollar Strip Yields versus Treasury YieldsImplied Eurodollar Yield versus Treasury YieldFixed Basis Point Spread to Eurodollar Futures RatesHow Do These Rates Compare?How Directional Is the Spread?Trading the SpreadsHedge RatiosWhat to Do with the StubOvernight FinancingTerm FinancingCarry and ConvergenceConvexityForward Term TED SpreadsTerm TED Spreads and Swap SpreadsAPPENDIX Complete Operating Instructions for Calculating Term TED Spreads and Hedge RatiosChapter 12 TED Spreads: An UpdateChapter 13 Hedging and Trading with Eurodollar Stacks, Packs, and BundlesGalen Burghardt, George Panos, and Fred Sturm Research note originally released December 15, 1999SynopsisThree ObjectivesHow Good Are Stack, Pack, and Bundle Hedges?Curve-Augmented TED Spreads?Hedging and Trading with Eurodollar Stacks, Packs, and BundlesBasics: Dates, Names, Packs, Bundles, and QuotesContract ColorsPacks and BundlesQuote Practices 1: TicksQuote Practices 2: Use Price Level for Individual ContractsQuote Practices 3: Use Price Changes for Packs and BundlesUnpacking Packs, Unbundling BundlesHedging with Stacks, Packs, and BundlesWhat Happens to the Correlations?Best Pack Proxies for Key Treasury MaturitiesHorizon MattersThe Dangers of DecorrelationScaling Your Hedges to Reduce Hedge ErrorTrading Curve TEDsCalculating the Hybrid SpreadLooking for OpportunitiesChapter 14 Hedging Extension and Compression Risk in Callable Agency NotesGalen Burghardt and William Hoskins Research note originally released March 24, 1995SynopsisIntroductionWhat Is the Exposure in a Callable Agency Issue?Extension and Compression RiskA Packaged DealWhat Is the Package Worth?What Is the Risk Exposure?Structuring a HedgeThe Option Is TougherFocus on Delta HedgingSynthetic Forward NotesDifferent DeltasExample of Hedging a 10-Year, 8.5 Percent Coupon Note, Callable in 5 YearsStep 1: Find the Price of the Forward NoteStep 2: Find the Embedded Option’s DeltaStep 3: Calculate Spot Market Hedge RatiosStep 4: Calculate Futures Hedge RatiosStep 5: Adjust the Hedge as Interest Rates ChangeThe Costs and Risks of Delta HedgingRisks in the HedgeThe Yield Spread between Agencies and TreasurysWhat If There Is Little or No Call Protection?Sometimes Strips of Eurodollar Futures Provide Better HedgesNetting PositionsAdjusting the HedgesChapter 15 Opportunities in the S&P 500 Calendar RollGalen Burghardt and George Panos Research note originally released June 7, 1999SynopsisSave 15 Basis Points per Year on the RollEliminate Interest Rate Risk in the RollEarn Superior Money Market ReturnsThe Value of the Calendar SpreadFair Value of the SpreadImplied Financing RateHow the Calendar Spread Has BehavedWhat Is Your Exposure to Interest Rates?Handling Rate Exposure in the RollHedging against Interest Rate RiskCash Management and Portfolio ReplicationChapter 16 Trading the Turn: 1993Galen Burghardt, Mike Bagatti, and Kevin Ferry Research note originally released October 25, 1993SynopsisWhat Is “the Turn”?Two-Day TurnsThree-Day TurnsFour-Day TurnsRate Behavior around the TurnEffects on Eurodollar and LIBOR Futures PricesRule of Thumb for a 4-Day TurnRule of Thumb for a 3-Day TurnRule of Thumb for a 2-Day TurnImplied Turn RatesImplications for Futures SpreadsDecember LED SpreadDecember/January LIBOR SpreadDecember/March Eurodollar SpreadDecember TED SpreadEffect of the Turn on LIBOR and Eurodollar VolatilitiesTheoretical Turn Volatility PremiumsSo What?The Risks in the TradeChapter 17 The Turn: An UpdateHedging the StubPart Four Building Blocks: Eurodollar OptionsChapter 18 The Eurodollar Option ContractOption Expirations and Underlying FuturesStandard Quarterly OptionsSerial OptionsMid-curve OptionsFive-Year Bundle OptionsOption Contract SpecificationsContract UnitPrice QuoteTick SizeMinimum FluctuationStrike Price IncrementsListed Contract MonthsContract Type and Month SymbolsSample Option QuotesTrading HoursLast Trading DayExercise of OptionAssignmentChapter 19 Price, Volatility, and Risk Parameter ConventionsPricing Options on FuturesOption Price (Market)VolatilityRelative Rate VolatilityRate (Basis Point) VolatilityPeriod VolatilityImplied VolatilityRisk ParametersDeltaGammaVegaThetaRhoIntrinsic and Time ValueChapter 20 Caps, Floors, and Eurodollar OptionsChapter 21 Structure and Patterns of Eurodollar Rate VolatilityHistorical, Implied, Realized, and Break-Even VolatilitiesTerm Structure of Eurodollar Rate VolatilityVolatility Calendar Spread TradeYield Curve TradeMaturity Structure of Volatility (Volatility Cones)Volatility SkewsImplied Rate DistributionsChapter 22 Practical ConsiderationsEarly ExerciseCash Settlement and ExercisePart Five Eurodollar Option ApplicationsTrading 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 OptionsGalen Burghardt and Scott Lyden Research note originally released June 22, 1998SynopsisEurodollar Strategy TriangleFOMC and Other Volatility TradesSpreads against OTC Treasury OptionsLIFFE Joins the CrowdThe Full Constellation of Eurodollar OptionsStandard Quarterly OptionsSerial OptionsMid-curve OptionsSerial 1-Year Mid-curve OptionsThe Beauty of This DesignThe Eurodollar Strategy TriangleJune/Short June (A Yield Curve Spread)Short June/Red June (A Time Decay Spread)March/Red June (A Volatility Curve Spread)Different Volatility HorizonsMid-curve Options versus OTC Treasury OptionsEurodollar/Treasury Volatility Spread TradingHow Do You Compare the Volatilities?How Do You Construct the Trades?Some Things to Keep in MindLIFFE’s OptionsChapter 24 Serial and Mid-curve Options: An UpdateChapter 25 What Happens to Eurodollar Volatility When Rates Fall?Galen Burghardt, George Panos, and Eric Zhang Research note originally released October 18, 2001BackgroundWas Volatility Rich or Cheap?Volatility and Rate LevelsWhy Relative Rate Volatility?What Is the Evidence?Is it the Fed?Practical ConsequencesChapter 26 Eurodollar Volatility: An UpdateChapter 27 Hedging Convexity BiasGalen Burghardt and George Panos Research note originally released August 2, 2001SynopsisThe ChallengesOvercoming the ChallengesHedging a 4-Year Swap/Eurodollar PositionGammaVegaEurodollar OptionsGamma Mismatch?The Choice?Robustness?GlossaryIndexAbout the AuthorFootnotesChapter 1Footnote 1Chapter 3Footnote 1Footnote 2Chapter 4Footnote 1Footnote 2Footnote 3Footnote 4Footnote 5Chapter 6Footnote 1Chapter 8Footnote 1Footnote 2Chapter 11Footnote 1Footnote 2Chapter 13Footnote 1Chapter 14Footnote 1Chapter 17Footnote 1Chapter 18Footnote 1Chapter 21Footnote 1Footnote 2Chapter 23Footnote 1Footnote 2GlossaryFootnote 1From the B&N Reads Blog
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