Short Term Interest Rate (STIR) markets remain a critical product within the fixed income asset class and are closely watched by investors keen to track central bankers’ policy moves. By far the largest of them all is the CME-traded Eurodollar futures market for 90-day liabilities.
What is LIBOR/What is Eurodollar
Understanding IMM Price and Date
Understanding Convexity Bias
Eurodollar Intramarket Spreads
Understanding Eurodollar Strips
Understanding Packs and Bundles
Previously, we discussed how market participants can use Eurodollars to hedge floating rate loans by using strips of Eurodollar futures. You might choose to hedge a one-year loan (hedge against higher interest rates) with quarterly reset dates by selling four quarterly Eurodollar futures contracts in what is known as a strip hedge. The strip consists of quarterly ED futures strung together.