On November 24, 2011, a firm plan to invest 20 millions euros for a 3 month period commencing on December 21,2011. the price of the December maturity of the 3 month Euribor contract is 98.600 while the current 3 months Euribor rate is 1.474% Pa. Note that the last trading day of the December futures contract is December 19 and the Delivery day is December 21.

What should the treasurer do to hedge his position?

Using the following information regarding the price evolution of the futures contract, determine the end of the day P&L and the variation margin. Remember that the initial margin is 850 euros per contract and that the maintenance margin is 850 euros per contract.

What is the final result of the hedging position?

Date	Settlement Price	3 months Euribor cash rate
11/24/2011	98.615	1.474
11/25/2011	98.615	1.475
11/28/2011	98.625	1.477
11/29/2011	98.670	1.477
11/30/2011	98.765	1.473
12/01/2011	98.780	1.469
12/02/2011	98.710	1.469
12/05/2011	98.700	1.470
12/06/2011	98.695	1.472
12/07/2011	98.725	1.472
12/08/2011	98.615	1.470
12/09/2011	98.585	1.437
12/12/2011	98.585	1.430
12/13/2011	98.590	1.426
12/14/2011	98.585	1.423
12/15/2011	98.590	1.419
12/16/2011	98.585	1.417
12/19/2011	98.582	1.418

Assume now that the 20 million euros investment will begin on December 9 (for a 3-months period). What should the treasurer do to hedge his position? Determine the target rate for the implied lending rate? Using the observed market information, determine the final result of the hedging position. Is there any difference with the target rate?