AI - Gold Fut - Vol 5. P No 187

Ex -2.

Where this 400 is coming from?

100 = Eurodollar future price at beginning

96.09 = Eurodollar future price at the End of period.

100-96.09 = Change in Price

/ 4 * 100 => converting to quarterly and accounting tor percent.

but then they are also using 91/90?

96.09 is the price for the full year.

I think there was something related to the use of 400 in the Level 1 Material.

For every 1,000,000$ of notional - 25 $ is paid out.

25/1,000,000 = 1/400,000

100/400,000 = 1/400

I was wrong about it being the quarterly thing before. the 91/90 converts to the quarterly.

I found this on a wikipedia

The Eurodollar futures contract refers to the financial futures contract based upon these deposits, traded at the Chicago Mercantile Exchange (CME). Eurodollar futures are a way for companies and banks to lock in an interest rate today, for money it intends to borrow or lend in the future.[7] Each CME Eurodollar futures contract has a notional or “face value” of $1,000,000, though the leverage used in futures allows one contract to be traded with a margin of about one thousand dollars.[8]

How the Eurodollar futures contract works

For example, if on a particular day an investor buys a single three month contract at 95.00 (implied settlement LIBOR of 5.00%):

  • if at the close of business on that day, the contract price has risen to 95.01 (implying a LIBOR decrease to 4.99%), US$25 will be paid into the investor’s margin account; or
  • if at the close of business on that day, the contract price has fallen to 94.99 (implying a LIBOR increase to 5.01%), US$25 will be deducted from the investor’s margin account.

On the settlement date, the settlement price is determined by the actual LIBOR fixing for that day rather than a market-determined contract price.

so $ 25 per tick (ie. 1 basis point). Were we suppose to be acquainted about it?

I felt it just the difference between 100-96.09 = corresponds to 3.91%

That is something that was talked about in both Level 1 and 2, if memory serves me right, but we never used it up until now, I guess.

I also dont see why use 91/90.

Day convention : 30/360

So there are 92 days (i.e. in July - 31, Aug 31 & Sep - 30) not 91 days.

actual days on numerator, 360 day convention in denominator.


Yes, So actual days between June & Sep are 92. Why 91?

that is 3-month Libor from June to Sep (100-96.09)= 3.91 Divide by 90 (since its 3 month Libor) & multiplied by 92 (actual days) then also divide by 400 to see 100 Eurodollar futures price impact (i.e. 25$ tick for $ 1 Mil)

and this is me PUNTING this question…

LOL…I hear ya mcap11. This is exactly the type of problem that is liable to suck up too much of my time and energy preparing for, only to end up miscalculating under exam day pressure and mess it up. Been there and done that during L2. Need to avoid making that mistake again this time around.

Any cash and carry or swap stuff for me is getting thrown out. Wastes valuable limited space in my tiny already filled to the brim brain. I’ll give them their two questions.

Equation 12 looks pretty to me. :slight_smile:


I have no book at hand.

I remember the period is from June to September. So June, July and August, 92 days?