Examine the historical prices of the Eurodollar futures contract you selected in Exercise 3 (select a time period that the contract was active).

a. Select a period in which you would have taken a long position and calculate the profit from opening and closing at the futures prices at the beginning and ending dates for your selected period. Calculate the losses if you had taken a short position.

b. Select a period in which you would have taken a short position and calculate the profits from opening and closing at the futures prices at the beginning and ending dates for your selected period. Calculate the losses if you had taken a long position.

c. Using the annotation bar, apply the "\% Change" tool to calculate the percentage change for your select periods, and then click the "News" icon on the annotation bar to find relevant news events on or preceding the opening date.

d. Examine the spot LIBOR for the period that your futures contract was active. Begin typing USooo (e.g., USooo3M for three-month LIBOR or USooo6M for six-month LIBOR) to see the dropdown that will identify the ticker for the LIBOR with the maturity of underlying Eurodollar on your selected futures contract. Comment on the LIBOR and futures price relations for the period.

e. Use the Chart screen (Chart ) to create multigraphs for the prices on the Eurodollar futures contract and the LIBOR. On the Chart Menu screen, select Standard G chart; once you have loaded your securities, go to “Edit" to put your graphs in separate panels.

f. Select a spot LIBOR that matches the maturity \((M)\) of your selected futures (e.g., USooo6M for six-months) and determine its rate on the date you set up your hedge and the spot price of a Eurodollar CD \(\left(\$ 100 / 1+\mathrm{LIBOR}^{M}\right)\). Select a LIBOR that is closest to the time to expiation ( \(T\) ) on the futures contract at the time you set up your hedge (e.g., USooO3M for three-month LIBOR). Using the carrying-cost model determine the futures equilibrium price:

\[f_{0}^{*}=S_{0}\left(1+R_{f}\right)^{T}\]

Compare the equilibrium price with the actual price on the date you set up the hedge.

Exercise 3.

Access Bloomberg information on a CME Eurodollar futures contract: Type CTM to bring up the "Contract Table Menu," click "Categories" and "Interest Rates," search for CME on the Menu (type CME in the amber Exchange box), find the CME contract of  interest, and bring up the contract's menu screen (Ticker ; e.g., EDA for three-month Eurodollar contract), and then use the Expiration screen (EXS) on the contract's menu page to find the ticker for the contract with the expiation month you want to analyze (Ticker ; e.g., EDH7 for the March 2017 contract). View screens to examine: DES and GP