Consider the data in Table 6.11, where P(ut (t, T1) is the price of a 90-day Eurodollar futures contract expiring on April 14, 2008; ((t, T1, T2) is the time t forward rate for 90 day LIBOR at April 14,2008; Z(t, Tx) is the LIBOR discount from t to April 14, 2008; and Z(t, t + dt) is the overnight LIBOR discount (where dt = 1 day).

(a) On April 14, 2008 the 90-day LIBOR was 2.7088%. Did the rates converge?

(b) What was the total profit / loss on April 14, 2008 of a futures contract entered on October 16, 2007?

(c) What would be the total profit / loss on April 14, 2008 of a forward contract entered on October 16, 2007?

Transcribed Image Text:

Panel A: Yeld Cures Date 2/15/1994 2/161994 2/17/1994 218/1994 2/22/19942231994 5/15/1 us R/15/1994 11/15/1904 2/i S1995 5/15/1995 H/157995 11/15/1995 2/15/1996 5/15/1096 K/15/1996 11/15/1996 2/15/1997 5/1N1997 H/15/1997 11/15/1997 2/15/1998 5/15/1998 N/15/1998 11/15/1998 357% 3.59% 3.80% 3.80% 4.01% 4.18% 427% 4,48% 4,58% 4,62% 4,76% 4,81% 4.95% 5.04% 5.14% 5.20% 3.25% 5.134 5.38% 369 3.59% i4% 389% 4.09% 418 420% 4,48% 458% 402% 4.77% 481 496% 504% 5.13 5.19% 525% 534g 538 MSIS 3.71% NYE 3.929 4,05 424% 430% 4504 4654 4.70% 4MG 4.99% 5.00% 5.13% 5.22% sos 53es 549% 530% 432% 3.55% 3.72E 4,08% 412% 4,32% 443% 459% 4.71% 4.75% 4.90% 4,04% 5,11% 5.19% 5.29% 5379 5.43% 553% 550% 3.5% 3.49% Mere 40% 4.21 434% 4464 465% 4.79% 4.73 490 4.92% 509% 5.19% 5294 536% 5,41% 559% 5s% 4, 19% 444% 475% 4 83% 501% 5.18% 541% 562% 70 5.74% 5/15/1999 5A9% 5.50% 5.61% 568% 5604 8/15/1999 5ses 3.50% 11/15/1999 557% 556% 568% 570% 57 5.62% 5.68% 566 582% 5.87% 5/ 52000 8/15/2000 11/าร/2000 2/15/2001 5/15/2001 %/15/2001 11/15/2001 5.65% 5.71% 5.70% 5.78% 504 5.85% 5.92% 566% 5.72% 5.77% 581% 5.84% 5.76% 5.0% 58% 592% 599% 5.85% 5.91% 6,01 5.99% 6,03 5A4 5.90% 5,94% 596A 60 591 937 6039 604% 611% 0.15% 621% 5.94% 6,03% Panel B:Chemight Racs 3.79% 0.13 6.13% มเ6/19942/17/1994 218/1994n2/1994 2/23/1994 3.54%, 3.90s 444%. Dan DatePrice Dale Price 21-Mat-07 35 7-May-0T 93185-07 93.09A-07 93.5 2Mar-07 93.685-May 07 9317522-Jun-07 93210 Aup-07 93260 Mar7 93570 May 93245 2u-7 93 19Aup-07 9330 S-Mar-07 93500 10-May-07 9309526-u07 93000-Aug-07 932 -Ma-07 93 320Ma-7 92825-07 93000-07 30 28-Mar-07 93.330 14-May.07 92935 28-Jun-07 93,015 14-Aug-07 93005 -Mar-07 9333015-May-07 92870 -un07 929455-Ang-47 93338 ). Mar07 93.575 16-May '07 92.995 2-Jul-07 92905 16-Aug-0793-咖 2-Apr-07 93.340-May-07 93010 l-07 92975 17 Aug 07 94 -Apr-07 933858-My-07 93090 Jul 417 92.930 20 Aug-0793.380 Apr-47933802-My-07 93120-Ju-407 92950 21-Aug-07 9341 Ape-093.34022-May-07 93.120-l-07 92995 22Aug-07 930 6-Apr-47 93455 23-May-07 93.050 10-Jul-07 93035 23-Aug-07 93440 Apr-0732May- 92.925 1-ul-07 9324-Aug-07 93.90 0-Ape-793245 2-Muy-07 92.915 12-Jul-07 9306S 27-Aug-07 93 11-Apr07 93,240 29,Mi'y437 9095 13-Jul-07 93-12。28-Aug-0793A80 i6-Apr47 93.060 31-Mayv07 93.010 17.Ju1-0793 195 N-Aug07 93se5 7-Ape-07 910-u-07 9360 18-1-07 93261-Au-07 93310 18-Apr-07 93365 4-Jun-07 93120-Ju-7 93265Sep-07 934 9-Ap-07 93080 5-Jun-07 93.19525-Ju1-07 93360 .Sep-07 93 a-Apr407 93.00。6-Jun-07 93225 23-Jul07 93295 6-Sep-07 93M) 23-Ap-07 98115 7-1u-07 93.1404-Jal-7 93290 -Sep-07 9331 34-Ap-0 93100 u-07 0 25-Jul 07 93.190 10-Sep-07 945 25-ApteT 93.120 11-Jun-0793.140 25-Jul407 93.170 ะเ-Sep07 93y 5 -Ap7 9313512-un-07 3385 2 ul-07 93235 13-Sep-07 93 27-Apr07 93015 13-JutN7 93.150 30.ju1-07 93290 14-Sep07 93620 0Ap-793.025 14 Ju-07 93,14S 31 Hul-07 93310 7 Sep-07 935 -May-07 93.08515-Ju-07 93.020 93265 18-Sep-79 2-May-07931358--07 92.99S g-07 93.190 19-Sep-07 9348 May-07 932509J-07 93.010 A 07 93140 20Sep-07 93 May-07 920 20-Jun-07 93.0 6 Aug-07 07 1160 21-Sep-07 330 15.jan-08 96.5900 3.6628% 0.9902 0.999侶 17-Oct-07 95.5150 4.8740% 4.7691% 0.9756 4.6475% 0.9761 4.5410 4.6208% 0.9769 0.9998 4.5184% 0.9772 0.9753 0.9998 19-0ct-07 95.6850 22-Ост-07 95.6700 18-Jan-08 96.7150 3.6295% 3.0388% 3.2957% 0.9908 0.9926 0.9928 0.9998 0.9768 0.9998 25-Jan-08 97.0650 0.9999 26-Oct-07 95.7350 4.4708% 0.9777 0.9998 29-lin-08 971050 3.1414% 0.9933 0.9999 30-lan-08 97.1850 3.1548% 0.9934 1-Feb-08 4-Feb-08 5-Feb-08 97.1700 97.1450 97.2400 2.9729 3.0675% 3.0789% 0.9938 0.9939 0.9940 0.9999 0.9999 0.9999 6-Nov-07 7-Nov-07 8-Nov-07 957050 95.7550 95.8950 4.5836% 4.5498% 4.5025 4.4121% 4.3647% 36 4.4676% 0.9790 0.9792 0.9794 0.9797 0.9801 09803 0.9803 0.9998 0.9998 0.9998 0 0.9998 7-Feb-08 97.2650 2.9297% 0.9942 0.9999 12-Nov-07 95.9300 14-Nov-O7 S-Nov-07 95.7900 95.9450 0.9998 14-Feb-08 15-Feb-08 972650 97.2600 2.9325% 0.9949 2.9446% 2.9701% 0.9953 0.9g99 3.0113% 0.9954 0.9999 3.0612% 0.9955 0.9999 0.9950 0.9999 20-Nov 0795.8300 21-Nov-07 95.9500 23-Nov-07 95.9500 20-Feb-0 97.1550 97.2000 97.1500 97.1200 0.9807 0.9908 0.9810 4.4663% 0.9813 4.3768% 0.9815 4488609815 4.4769% 0.9816 4.4795% 0.9817 4.4383% 0.9821 4.4359% 4.4164% 4.3945% 0.9998 0.9998 0.9998 21-Feb-08 22-Feb-08 25-Feb-08 27-Nov-07 95.9700 28-Nov-07 95.8900 29-Nov-07 95.9850 30-Nov-07 96.0000 3-Dec-O7 95.9700 -Dec-07 950650 5-Dec-07 95.9650 6-Dec-07 95.8750 7-Dec-07 95.7400 10-Dec-07 95.7250 11-Dec-07 957050 12-Dec-07 95.8100 13-Dec-07 95.7350 0.0098 09998 0.9998 27-Feb-08 28-Feb-08 29-Feb-08 97.1900 97.2500 97.3800 2.9751% 0.9961 0.9998 5-Mar-08 97.3000 2.8999% 0.9967 0.9999 4.4754% 0.9823 4.4785% 0.9825 4.5479% 0.9826 4.6552% 0.9829 46395% 0.9831 4.6333% 0,9833 4,5007% 0.9836 4.5878% 0.9838 0.9998 0.9998 9998 0.9998 0.9998 0.9998 0.9998 10-Mar-08 97.4850 11-Mar-08 974000 12-Mar-08 974450 13-Mar-0897 4900 14-Mar-08 97.6350 27963% 0.9974 0.9999 2.7150% 0.9977 0.9999 4.6172% 0.9842 0.9998 0.9998 0.9998 0.9998 09998 2.4785% 25706% 0.9982 0.9982 18-Dec-07 19-Dec-07 20-Dec-07 21-Dec-07 95.7850 958450 95.8700 95.8250 4.5908% 452 11 % 4.4680% 4.4625% 0.9844 0.9846 0.9849 0.9851 4.4741% 0.9855 0.9859 0.9863 0.9866 09869 19-Mar-08 20-Mar-08 25-Mar-08 26-Mar08 975600 97.5275 97.4350 974250 0.9999 26671% 09987 0.9999 27-Dec-07 28-Dec-07 31-Dec-07 2-lan-08 95.8050 95.8850 95.9350 96.000 4.5054% 4.4921% 4.4191% 4.3892% 0.9998 0.9998 0.9998 0.9998 28-Mar-0897.4250 31-Mar-08 97.4400 1-Apr-08 2-Apr-08 97.3200 26844% 2.6704% 2.6633% 2.6937% 0.9988 0.9990 0.9990 0.9991 0.9999 0.9999 0.9999 0.9999 97.3800 4-Jan-08 7-Jan-08 8-Jan-08 96.1950 96.2200 96.2300 4.2555% 4.1396% 4.1183% 09874 0.9879 0.9882 4.0523% 0.9884 0.9887 3.8858% 0.9891 0.9900 0.9998 0.9998 0.9998 4-Apr-08 7-Apr-08 8-Apr-08 97.3600 97.3150 97.2550 2.7352% 2.7120% 2.7066% 0.0993 0.9995 0.9995 0.9999 0.9999 0.9999 10-lan-08 96.4000 3.9889% 0.9998 10-Apr-08 11-Apr-08 14-Apr-0897.2912 97.2800 97.2850 2.6974% 2.6974% 2.7088% 0.9997 0.9997 1.0000 0.9999 0.9999 0.9999 14-Jan-08 96.6300 3.6526% 0.9998