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All main topics / Finance & Investment / Derivatives / Derivatives
138
A trader uses 3-month Eurodollar futures to lock in a rate on $5 million for six months. How many contracts are required?
A.5
B.10
C.15
D.20

Answer: B

Each contract locks in the rate on $1 million dollars for three months. A six month instrument is approximately twice as sensitive to rate movements as a three month instrument because it has twice the duration. 2×5 = 10 contracts are therefore required
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Flashcard info:
Author: CoboCards-User
Main topic: Finance & Investment
Topic: Derivatives
Published: 27.10.2015

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