Is anyone able to assist with this .... I trade 3 Month Eurodollar interest rate futures (CME ) which is all well and good . However , if i'm interested in trading lets say 9 months Eurodollar rate , is there any way of doing this be it in an established market or a synthetic approach . Any assistance appreciated.
Mr.J-Arthur
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no idea, sorry.
I also trade Euro future contracts.
I also trade Euro future contracts.
arabianights
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Yes and no! You can do it with some degree of precision by taking a position in three main months but you then have to exit all but the front month at the correct time if you are doing a naked speculation.
Think of it like this: borrowing for nine months is like borrowing for three months, borrowing again for three months... And borrowing once more for three months albeit for different prices.
I'd go into much more detail but I'm on a train that stinks of **** several hours late as I had to take a different train and change at Leeds and got the last seat in first class which is nowhere near as good as the national experr one and was surrounded by annoying housewive types oops drunken ranting... pulling into Dunbar.
For more information what I suggest the OP does is research how a forward rate agreement may be hedged in the STIRS. In this case pXp+9 one. Should be clear from there how one goes about doing it. As I say your main difficulty is in exiting the position as you can't just wait for the third month to go off the board.
Pulled out of Dunbar now and I should be in Ayr by midnight...
Think of it like this: borrowing for nine months is like borrowing for three months, borrowing again for three months... And borrowing once more for three months albeit for different prices.
I'd go into much more detail but I'm on a train that stinks of **** several hours late as I had to take a different train and change at Leeds and got the last seat in first class which is nowhere near as good as the national experr one and was surrounded by annoying housewive types oops drunken ranting... pulling into Dunbar.
For more information what I suggest the OP does is research how a forward rate agreement may be hedged in the STIRS. In this case pXp+9 one. Should be clear from there how one goes about doing it. As I say your main difficulty is in exiting the position as you can't just wait for the third month to go off the board.
Pulled out of Dunbar now and I should be in Ayr by midnight...
I trade E$ Futures also. Here is how I would imagine you would go about it. I'll try it on paper later... I believe, similar to above poster says, you can use the spot rates to directly relate, hence synthetically trade the 9-month libor rate.
This is a clarified version of an equation taken from the CME website, you can see that you can calculate the 6 month spot rate, which is essentially the 6 month libor, from the 3 months forward rate (100 - E$) and 3 month spot.
1 + 6 months spot rate * ((Days Remaining to 6 months expiration)/360) = (1 + 3 month spot rate * (Days Remaining to 3 month expiration)/360) (1 + (3 months FORWARD rate)*(Days Remaining to 3 month expiration)/360)
So from reorganizing the formula, I believe you should be able to grab the 9 month libor from the E$ rate...
This is a clarified version of an equation taken from the CME website, you can see that you can calculate the 6 month spot rate, which is essentially the 6 month libor, from the 3 months forward rate (100 - E$) and 3 month spot.
1 + 6 months spot rate * ((Days Remaining to 6 months expiration)/360) = (1 + 3 month spot rate * (Days Remaining to 3 month expiration)/360) (1 + (3 months FORWARD rate)*(Days Remaining to 3 month expiration)/360)
So from reorganizing the formula, I believe you should be able to grab the 9 month libor from the E$ rate...
