Question
You are going to borrow USD$2M in London for 3 months, using the prevailing 3-month LIBOR rate in 6 months. You want to use the
You are going to borrow USD$2M in London for 3 months, using the prevailing 3-month LIBOR rate in 6 months. You want to use the Eurodollar futures to hedge against the adverse interest rate movement. The Three-month Eurodollar futures contract expiring in 6 months is trading at 98.25. Which of the following is (are) true?
| DV01 of the amount to borrow is $50. | ||
| DV01 of one Three-month Eurodollar futures contract is $20. | ||
| The number of contract to enter to hedge the risk is 4. | ||
| Should take a long position to hedge the risk. |
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Financial management theory and practice
Authors: Eugene F. Brigham and Michael C. Ehrhardt
12th Edition
978-0030243998, 30243998, 324422695, 978-0324422696
