Eurodollar Futures: a) What is meant by a long position and a short position in Eurodollar...

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Eurodollar Futures: a) What is meant by a long position and a short position in Eurodollar Futures? b) Explain using a numerical example why a long position in a Eurodollar Futures contract loses money when interest rate increases but gains when Eurodollar quote increases. c) It is January now. Manager wants to refinance his assets in March and is concerned rates may rise. He wants to borrow $100m for 3 months starting March. The March expiry Eurodollar Futures Quote is 95. (i.e., 5% annual). Manager is fine with paying 5% interest on the borrowing. Compute the net cost to the manager is the Eurodollar settles at 90 in March. Interest Rate Swap: a) Explain in words how annualized spot rates can be computed from annualized futures rates? b) It is March now. Compute the interest payments for a notional $25 million dollars if the 3- month futures quote with June expiry is 99.50 and the 3-month futures quote Sept expiry is 98.00. Credit Default Swap: a) Explain what is survival probability? What is default probability? b) What is the meaning of protection buyer? Does a protection buyer buy a CDS contract or sell a CDS contract? Eurodollar Futures: a) What is meant by a long position and a short position in Eurodollar Futures? b) Explain using a numerical example why a long position in a Eurodollar Futures contract loses money when interest rate increases but gains when Eurodollar quote increases. c) It is January now. Manager wants to refinance his assets in March and is concerned rates may rise. He wants to borrow $100m for 3 months starting March. The March expiry Eurodollar Futures Quote is 95. (i.e., 5% annual). Manager is fine with paying 5% interest on the borrowing. Compute the net cost to the manager is the Eurodollar settles at 90 in March. Interest Rate Swap: a) Explain in words how annualized spot rates can be computed from annualized futures rates? b) It is March now. Compute the interest payments for a notional $25 million dollars if the 3- month futures quote with June expiry is 99.50 and the 3-month futures quote Sept expiry is 98.00. Credit Default Swap: a) Explain what is survival probability? What is default probability? b) What is the meaning of protection buyer? Does a protection buyer buy a CDS contract or sell a CDS contract?

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Eurodollar a A long position in Eurodollar futures is a bet that ... View the full answer