Tag Info

New answers tagged

0

Yes, for futures I would use the Notional Value of the contracts for example Number of Contracts times 250 times S&P level for the big S&P futures, and similarly for other futures (50 for mini S&P, 1000 for Crude, 100 for Gold, etc.). And number of contracts is negative for a short position.


4

The CME' Fed Fund Futures are what you are looking for. http://www.cmegroup.com/trading/interest-rates/stir/30-day-federal-fund.html On settlement day they settle at the average overnight rate set by the Fed during the contract month.


3

it's easiest to see in terms of replication. The pay-off of a forward contract is $$ S_T - K. $$ We can replicate this precisely and statically by buying one unit of stock, $S_0,$ and $Ke^{-rT}$ riskless bonds growing at rate $r.$ So its value today is $$ S_0 - Ke^{-rT}. $$ This has zero value if and only if $K= S_0 e^{rT}.$ This value is then called ...


2

The forward price $F$ for a forward contract, determined at the contract inception time today, is the price that the holder will pay at maturity $T$ to buy the underlying equity. Then the payoff, at maturity $T$, of the forward contract is given by \begin{align*} S_T-F. \end{align*} The present value of the contract is then \begin{align*} e^{-rT} ...


2

When you buy a forward you don't have to invest any money, so that's to your advantage in a world of positive interest rates. To charge you the same as the spot rate would be unfair, you would be "getting something for nothing", that is why the appropriate price for a forward is higher. It takes the interest rate into account, balancing things out. In ...


1

if I short the futures, at expiry I'll lose if 3 months LIBOR goes higher than the initial forward price If you short the future and LIBOR rate goes up you will actually make money, not lose money. If you short a Eurodollar contract you are effectively locking in that interest rate. Here's an example. Say it's December 2015 and you need to borrow 1M ...


1

This link has a worthwhile discussion of two possible approaches: the Nearby approach (paragraph 6.6.1) and the Constant Maturity approach (para 6.6.2). http://www.value-at-risk.net/futures-prices/ . With the pluses and minuses of each. Ultimately it is going to come down to your judgement of what is best in your situation.


0

There are ways to get a continuous time series from switching futures prices. These include: 1) Taking return of a leading future contract (max open interest) on every date, and 2) Taking a weighted average return among a group of leading contracts, with weights based on open interest of each contract. For example: R_average = (OI1*R1 + OI2*R2)/(OI1 + OI2) ...



Top 50 recent answers are included