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It is 1 st January and you expect to receive $ 1 0 m in 2 months time. You will place this receipt in a

It is

1

st January and you expect to receive $

10

m in

2

months time. You

will place this receipt in a bank deposit for a further

5

months, on which

you will receive LIBOR. Explain what Eurodollar futures contract you

would use to hedge your cash position. What are the risks in the hedge

you have chosen?

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