1.Suppose that today is Monday, February 20th and you have a loan of $10,000,000 outstanding, on which you will have to make a floating-rate interest rate payment on Friday, February 24th. The interest payment is determined based on a 3-month LIBOR rate on that day. You fear that in the next several days the rate might rise. So you hedge yourself by trading Eurodollar futures. Assume that you enter into the position at close of day on Monday, February 20th.
a.In order to hedge yourself, which position in Eurodollar futures will you take (i.e. buy or sell, contract maturity, and the number of contracts)?
b.What is the value of your futures position on Monday, February 20th?
c.What is your daily gain or loss on your futures position (on Tuesday, Wednesday, Thursday, and Friday)?
d.What is the interest rate payment that you have to make on Friday, February 24th, on your $10,000,000 loan?
e.What is the net cost to you, taking into account the gains/losses on your hedge, plus the interest payment on the loan (ignore the time value of money)?
Daily Settlements for Eurodollar Futures (FINAL)Trade Date: 02/21/2017 (Tuesday)
|
Month
|
Open
|
High
|
Low
|
Last
|
Change
|
Settle
|
Estimated Volume
|
Prior Day Open Interest
|
|
MAR 17
|
98.9100
|
98.9100
|
98.8900
|
98.8925
|
-.0150
|
98.8925
|
209,749
|
1,390,009
|
|
APR 17
|
98.8450
|
98.8450
|
98.8250
|
98.8250
|
-.0150
|
98.8250
|
11,559
|
129,757
|
|
MAY 17
|
98.7700
|
98.7700
|
98.7600
|
98.7650
|
-.0200
|
98.7650
|
1,781
|
44,469
|
|
JUN 17
|
98.7300
|
98.7350
|
98.7000
|
98.7050
|
-.0200
|
98.7100
|
260,830
|
1,525,881
|
|
JLY 17
|
-
|
-
|
98.6750A
|
98.6750A
|
-.0250
|
98.6750
|
0
|
2,849
|
Daily Settlements for Eurodollar Futures (FINAL)Trade Date: 02/23/2017 (Thursday)
|
Month
|
Open
|
High
|
Low
|
Last
|
Change
|
Settle
|
Estimated Volume
|
Prior Day Open Interest
|
|
MAR 17
|
98.9025
|
98.9125
|
98.8975
|
98.9075
|
UNCH
|
98.9050
|
245,766
|
1,395,228
|
|
APR 17
|
98.8300
|
98.8450
|
98.8300
|
98.8450
|
+.0050
|
98.8400
|
19,813
|
141,194
|
|
MAY 17
|
98.7750
|
98.7900
|
98.7750
|
98.7900B
|
+.0050
|
98.7850
|
15,191
|
46,135
|
|
JUN 17
|
98.7200
|
98.7450
|
98.7150
|
98.7450
|
+.0150
|
98.7400
|
428,926
|
1,524,849
|
|
JLY 17
|
-
|
98.7050B
|
-
|
98.7050B
|
+.0150
|
98.7000
|
13
|
3,532
|
Daily Settlements for Eurodollar Futures (FINAL)Trade Date: 02/24/2017 (Friday)
|
Month
|
Open
|
High
|
Low
|
Last
|
Change
|
Settle
|
Estimated Volume
|
Prior Day Open Interest
|
|
MAR 17
|
98.9075
|
98.9175
|
98.9000
|
98.9075
|
+.0025
|
98.9075
|
314,150
|
1,398,987
|
|
APR 17
|
98.8400
|
98.8550
|
98.8400
|
98.8500
|
+.0100
|
98.8500
|
11,765
|
140,678
|
|
MAY 17
|
98.7900
|
98.8050
|
98.7850
|
98.7950
|
+.0150
|
98.8000
|
5,012
|
52,526
|
|
JUN 17
|
98.7400
|
98.7600
|
98.7350
|
98.7550
|
+.0100
|
98.7500
|
308,236
|
1,511,995
|
|
JLY 17
|
-
|
98.7200B
|
-
|
98.7200B
|
+.0200
|
98.7200
|
0
|
3,532
|
3-month LIBOR rate:
February 20, 2017 1.05233
February 21, 2017 1.05011
February 22, 2017 1.05344
February 23, 2017 1.05400
February 24, 2017 1.05233