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Essay sample - Derivative Markets Marketing Essay
Pages 7 (1757 words)
Derivative Markets Table of Contents Table of Contents 2 Section A 3 Statement 1 3 Statement 2 4 Statement 3 5 Statement 4 6 Statement 5 7 Section B 8 Hedging 8 Arbitrage 9 Speculation 9 References 9 Bibliography 12 Section A Statement 1 “Hedging a sterling interest rate risk is impossible when using a Eurodollar futures contract” Future contracts are regarded as common hedging products…
Several investors concluded that Eurodollar futures deliver a valuable, commercial instrument for hedging variations in ‘short-term USD interest rates’. Eurodollar futures contract returns market potential for interest rates on Euro Dollar securities for particular times in future. The ‘5 year E-Mini Bundle Futures’ of Eurodollar contracts offer organizations to get disclosure to the 5 year term on USD interest rate interchange. This pack allows transaction of the monetary equivalent of 20 quarterly Euro Dollar terminations in a single contract. Through Eurodollar contract, organizations can get the following benefits: Supreme liquidity with reliably strong bid and lower operational costs Diversity of transaction prospects which comprises of hedging, arbitrage, dispersal against other contracts and money equalization tactics Price clearness where swapping takes place in exposed, reasonable and unidentified markets Greater functionality on the organisation’s automated trading platform which provides apparent and competitive performances and effective ‘around the clock’ contact Thus, from the above explanations it can be said that statement 1 is not true. ...
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