Recall the FRA problem presented as Example 11.2. Show how the bank can alternatively use a position

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Recall the FRA problem presented as Example 11.2. Show how the bank can alternatively use a position in Eurodollar futures contracts to hedge the interest rate risk created by the maturity mismatch it has with the $3,000,000 six month Eurodollar deposit and rollover Eurocredit position indexed to three-month LIBOR. Assume that the bank can take a position in Eurodollar futures contracts that mature in three months and have a futures price of 94.00.

Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...
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International Financial Management

ISBN: 978-0078034657

6th Edition

Authors: Cheol S. Eun, Bruce G.Resnick

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