Timeline for Synthetic FRAs using Eurodollar futures
Current License: CC BY-SA 4.0
4 events
| when toggle format | what | by | license | comment | |
|---|---|---|---|---|---|
| Apr 23, 2020 at 10:39 | comment | added | David Duarte | Yes, the settlement of the futures will be upfront. Consider as a simple example that 30 days before the fixing the 90 day forward rate is 2% and you protect yourself against a rate rise with futures. If at the fixing date the rate turns out to be 3%, you will "receive" 1% from the futures and end up with a net payment of 2% (3% - 1%). The futures (1%) will be settled at the beginning and the fixing (3%) will be settled at the end. | |
| Apr 23, 2020 at 10:13 | comment | added | user506602 | Just to recap. This means that Eurodollar contract will be a cash settlement on the settlement date by paying upfront (beg of the loan) rather than at the end of the 3-month loan like in an actual loan. Am I correct? | |
| Apr 21, 2020 at 16:52 | vote | accept | user506602 | ||
| Apr 21, 2020 at 16:39 | history | answered | David Duarte | CC BY-SA 4.0 |