The Eurodollar Futures and Options Handbook / Edition 1

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Overview

Today's Most Up-to-Date and Comprehensive Resource for Eurodollar Futures Traders, Hedgers, and Researchers

Eurodollar futures, and put and call options traded on those futures, revolutionized the world of banking and finance and are now among the most widely traded money market contracts in the world. The Eurodollar Futures and Options Handbook explores the complete range of current research and trading practice on these uniquely flexible trading vehicles, and tells you everything you need to know to increase your profits—and, more important, control your losses—when navigating this complex market.

Featuring contributions from leading Eurodollar experts, including the author's seminal articles on Eurodollar convexity bias and measuring and trading term TED spreads, this long-awaited book explains:

  • Eurodollar futures—What they are, how they are priced, and how they can be used to hedge interest rate risk and trade the yield curve
  • Eurodollar options — Structures and patterns of Eurodollar rate volatilities, along with price, volatility, and risk parameter conventions of Eurodollar options

Eurodollar futures and options trading has grown exponentially, with no end in sight to its phenomenal growth. Let The Eurodollar Futures and Options Handbook arm you with the latest knowledge on these important trading vehicles, and provide you with the strategies and techniques you need to make the most of this liquid and lucrative market.

Today's Eurodollar market—the market for dollar denominated deposits outside of the United States—is perhaps the largest and most liquid of the world's short-term dollar markets and is becoming the new standard of value for fixed income markets. For over a decade, futures and options traders in this market have relied on Eurodollar Futures and Options (by Burghardt, Belton, Lane, Luce, and McVey) for accurate market analysis coupled with solid, results-oriented trading and hedging strategies. Markets have changed dramatically, however, and the need for a comprehensive new handbook has become obvious and acute.

The Eurodollar Futures and Options Handbook takes over where that book left off and incorporates all of the major advances in understanding how Eurodollar futures and options work and how traders and hedgers should use them. With contributions from Galen Burghardt, his colleagues, and collaborators, this hands-on volume focuses on every facet of this powerful market. It provides practitioners with practical, detailed discussions of:

  • The Eurodollar Market—Growth, expansion, and consolidation of the interest rate markets
    • Key money market developments
    • The birth of Eurodollar futures
    • Exchange-traded money market futures and OTC interest rate swaps
  • Eurodollar Futures—The Eurodollar futures contract
    • Forward and futures interest rates
    • Hedging with Eurodollar futures
    • Pricing and hedging swaps
    • The convexity bias, with new convexity bias series
    • Measuring and trading term TED spreads
    • Hedging and trading with stacks, packs, and bundles
    • Hedging extension risk in callable agency notes
    • The S&P 500 calendar roll
    • Trading the turn
  • Eurodollar Options—The Eurodollar option contract
    • Price, volatility, and risk parameter conventions
    • Caps, floors, and Eurodollar options
    • Structure and patterns of Eurodollar rate volatility
    • Trading with serial and mid-curve Eurodollar options
    • Relative versus basis point volatility, including volatility cones
    • Hedging convexity bias

Until now, most of the material in this book was available only in assorted and often hard to find research notes. Eurodollar futures and options traders had to seek out special courses or know someone who had access to these notes. The Eurodollar Futures and Options Handbook combines greatly improved basic tools and research applications with current research on Eurodollar futures and options, and saves you both time and money by giving you all of the important basic tools and applications in one comprehensive, accessible volume.

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Product Details

  • ISBN-13: 9780071418553
  • Publisher: McGraw-Hill Professional Publishing
  • Publication date: 6/23/2003
  • Series: McGraw-Hill Library of Investment and Finance Series
  • Edition description: First Edition
  • Edition number: 1
  • Pages: 350
  • Sales rank: 430,635
  • Product dimensions: 6.30 (w) x 9.30 (h) x 1.40 (d)

Meet the Author

Galen Burghardt, Ph.D. is senior vice president and director of research for Carr Futures, adjunct professor of finance at the University of Chicago, and an accomplished author on investing.

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Table of Contents

List of Exhibits
List of Examples
List of Equations
List of Contributors
Foreword
Pt. 1 The Emergence of the Eurodollar Market
Ch. 1 The Emergence of the Eurodollar Market 3
Pt. 2 Building Blocks: Eurodollar Futures
Ch. 2 The Eurodollar Time Deposit 23
Ch. 3 The Eurodollar Futures Contract 29
Ch. 4 Forward and Futures Interest Rates 43
Ch. 5 Hedging with Eurodollar Futures 69
Ch. 6 Pricing and Hedging a Swap with Eurodollar Futures 95
Pt. 3 Eurodollar Futures Applications
Ch. 7 The Convexity Bias in Eurodollar Futures 135
Ch. 8 Convexity Bias Report Card 179
Ch. 9 New Convexity Bias Series 185
Ch. 10 Convexity Bias: An Update 189
Ch. 11 Measuring and Trading Term TED Spreads 195
Ch. 12 TED Spreads: An Update 243
Ch. 13 Hedging and Trading with Eurodollar Stacks, Packs, and Bundles 249
Ch. 14 Hedging Extension and Compression Risk in Callable Agency Notes 281
Ch. 15 Opportunities in the S&P 500 Calendar Roll 311
Ch. 16 Trading the Turn: 1993 323
Ch. 17 The Turn: An Update 343
Pt. 4 Building Blocks: Eurodollar Options
Ch. 18 The Eurodollar Option Contract 351
Ch. 19 Price, Volatility, ad Risk Parameter Conventions 363
Ch. 20 Caps, Floors, and Eurodollar Options 375
Ch. 21 Structure and Patterns of Eurodollar Rate Volatility 381
Ch. 22 Practical Considerations 399
Pt. 5 Eurodollar Option Applications
Ch. 23 Trading with Serial and Mid-curve Eurodollar Options 405
Ch. 24 Serial and Mid-curve Options: An Update 427
Ch. 25 What Happens to Eurodollar Volatility When Rates Fall? 429
Ch. 26 Eurodollar Volatility: An Update 437
Ch. 27 Hedging Convexity Bias 441
Glossary 453
Index 463
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