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I would like to calculate the interest rate from a EuroDollar Future Contract(say the Sep-16 Futures Contract is trading at 99.2575). From the interest rate, I would like to calculate the zero coupon rate and discount factor.

The values of EuroDollar Futures Contract looks like this:

        Price   Zero Coupon Discount Factor
Sep-16  99.2575 0.673049123 0.997116025
Dec-16  99.185  0.725403393 0.995093125
Mar-17  99.1475 0.757944554 0.993081443
Jun-17  99.1075 0.787513853 0.990695774

Not sure how to work out the interest rate, zero coupon and discount factor.

Need some guidance on doing this.

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2 Answers 2

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1) convert the futures prices into forward rates by using forward rate= 100- futures price. You now have a chain of forward rates, starting with the rate from Sep 16 to Dec 16.

2) you need a rate from today to Sep 16. Use 2 month spot Libor

3) to calculate a zero coupon rate from today to any given date, chain together the relevant forward rates. eg the rate to Mar 17 is calculated by chaining together (today to Sep16), (sep 16 to dec 16), (dec 16 to mar 17).

4) discount factors can be calculated from zero coupon rates in the standard manner (reciprocal of one dollar invested in the zero coupon rate for the relevant period)

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these instruments are quoted as: 100 - yield. Thus 99.25 would correspond to a yield of 0.75 (%).

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