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A short-term interest rate (STIR) future is a futures contract that derives its value from the interest rate at maturation. Common short-term interest rate futures are Eurodollar, Euribor, Euroyen, Short Sterling and Euroswiss, which are calculated on LIBOR at settlement, with the exception of Euribor which is based on Euribor and Euroyen which is based on TIBOR.
The Eurodollar futures contract was launched in 1981. It was the first cash-settled futures contract. [13] It traded on the Chicago Mercantile Exchange. [14] Eurodollar futures were an instrument used to wager on Federal Reserve policy or to hedge the direction of short-term interest rates.
TED is an acronym formed from T-Bill and ED, the ticker symbol for the Eurodollar futures contract. Initially, the TED spread was the difference between the interest rates for three-month U.S. Treasuries contracts and the three-month Eurodollars contract as represented by the London Interbank Offered Rate (LIBOR).
In addition, the daily futures-settlement failure risk is borne by an exchange, rather than an individual party, further limiting credit risk in futures. Example: Consider a futures contract with a $100 price: Let's say that on day 50, a futures contract with a $100 delivery price (on the same underlying asset as the future) costs $88. On day ...
This is a list of notable futures exchanges. Those stock exchanges that also offer trading in futures contracts besides trading in securities are listed both here and the list of stock exchanges .
The IMM dates are the four quarterly dates of each year which certain money market and Foreign Exchange futures contracts and option contracts use as their scheduled maturity date or termination date. The dates are the third Wednesday of March, June, September and December (i.e., between the 15th and 21st, whichever such day is a Wednesday).
In finance, a spread trade (also known as a relative value trade) is the simultaneous purchase of one security and sale of a related security, called legs, as a unit.Spread trades are usually executed with options or futures contracts as the legs, but other securities are sometimes used.
The International Monetary Market (IMM), a related exchange created within the old Chicago Mercantile Exchange and largely the creation of Leo Melamed, was one of four divisions of the CME Group (CME), the largest futures exchange in the United States, for the trading of futures contracts and options on futures.