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I am looking at Eurodollar Futures contracts and was wondering how to build series ED1 up to say ED20.

Let's assume I have data from 01-01-2004.

My understanding is that:

  1. ED1 - perpetual front-month contract; i.e. I rollover March, June, September and December contracts
  2. ED2 - means it is 2 quarters out; thus I am assuming I roll-over June to December contracts
  3. ED 4- that would a be contract that is 4 quarters out; i.e. roll-over December contracts

What about ED3, ED5 etc?

I mean ED3 is a contract that expires in 9-months and ED5 would be expiring in 15-months. How do I build these series?

I am sorry if I sound stupid but I'm fairly new to these definitions of ED1...ED20 etc. I want to build a series so I can test some financial models I am working on.

Thanks for any help provided.

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    $\begingroup$ You roll all of them quarterly. Initially ED1 is based on EDH2004, ED2 is based on EDM2004, ED4 is EDH2005, etc. Three months later ED1 rolls to EDM2004, ED2 rolls to EDU2004, ED4 to EDM2005, etc. (H=March, M= June, U=Sep, Z=Dec). $\endgroup$ – Alex C Mar 22 at 22:51
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Thanks for replying so quickly.

I am confused...So if I go by your explanation we have the following:

  1. ED1 - EDH04 should roll-over to EDM04 then EDU04 and finally EDZ04. This means that the maturity of each contract is approximately 91 days or 1 quarter out.

  2. ED2 - If I go by your explanation the first contract used is EDM04 and then I should roll-over to EDU04. But then if you say it should roll-over to EDU04 then the maturity is not the same. So I stand at 01 Jan 2004 and buy an EM04 contract which is 2 quarters out...if I roll-over to the EDU04 contract it means that the next maturity is 1 quarter out. This would not equate to an ED2 (i.e. 2 quarters out) series.

So basically ED2 should start with an EDM04 contract and roll-over to the next 2nd expiring contract, i.e. EDZ04. Thus you have a six-month contract and roll-over to the next available six-month contract.

Am I right?

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  • $\begingroup$ Imagine a line of soldiers standing one after the other. The first soldier is killed (expires), so the second soldier steps into the 1st place, the 3d soldier steps foward into the 2d, and so on all down the line. And this keeps happening every 3 months. $\endgroup$ – Alex C Mar 23 at 13:18
  • $\begingroup$ Yeah I get that. What u r describing is ED1. So ED2 should be 2 quarters out contracts. That is once june expires enter a december contract. ED3 would be september then followed by the closest 3 quarters out contract which is June $\endgroup$ – Parvesh Mar 23 at 14:21
  • $\begingroup$ Im not sure you get it. If it is February 2004, we have (ED1, ED2, ED3, ED4,......) = (EDH4, EDM4, EDU4, EDZ4, ....). If it is May 2004, we have (ED1, ED2, ED3, ED4,......) = (EDM4, EDU4, EDZ4,, EDH5, ...). They all roll 3mo forward at a time. $\endgroup$ – dm63 Apr 22 at 13:19

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