# Futures

Please post your reasons. Many thanks S Which of the following statements about futures contracts on U.S. exchanges is least likely accurate? A) If annualized 90-day LIBOR decreases from 3.64% to 3.58%, a long position in a \$1 million Eurodollar futures contract loses \$150. B) A \$100,000 Treasury bond futures contract that settles at 102-16 represents Treasury bonds worth \$102,500. C) The value of an S&P 500 Index Futures contract with a multiplier of \$250 has a value of \$354,575 on the settlement date if the index value on that date is 1418.3. D) Prices of currency futures contracts are quoted as U.S. dollars per unit of the foreign currency.

is it D?

why not c ? it looks incomplete to me

contract value=multiplier*index value

D might be true for the domestic US market, but the US might not even be the currency exchanged, or it might be a foreign exchange market quote. Not ALL currency futures are quoted in US/unit of foreign currency.

Neither A or B is true but A is more obviously false. A) ED contracts are priced like 1 - LIBOR rate (they are supposed to look like bonds). If LIBOR decreases, you make \$ on a ED contract B) Is complicated but a T-bond contract is deliverable and the only way that a T-bond contract at 102.5 represents 102,500 worth of bonds is if the cheapest to deliver bond has a 6% coupon. C) Probably right but don't feel like multiplying d) Is just the way they quote them. The reason for this is that there are four possible combinations of ways to make the contracts (denominate contracts in or FC; price in /FC or FC/). The only one of those which makes it so that a change of say 0.01 ion the FC = constant dollar gain or loss at any level is to denominate contract in FC (so a contract is 125,000 Euro, e.g.) and the contract is quoted \$/FC. That means a 1 tick move in the contract is worth \$12.50 for any level.

map1 Wrote: ------------------------------------------------------- > D might be true for the domestic US market, but > the US might not even be the currency exchanged, \> or it might be a foreign exchange market quote. \> Not ALL currency futures are quoted in US/unit of > foreign currency. All currency futures about exchange rates versus the dollar traded in the US are quoted that way. If you were making a futures contract in Tel Aviv you would denominate the contract in \$ and quote it shekels/dollar.

A is incorrect. LIBOR interest decrease, but quote (IMM index) of the future will increase. The buyer of future will gain, not lose.

That’s what I said, that it might be true for contracts traded in the US, not for futures in Tel Aviv. D suggests that’s the way futures are quoted, which is not ALWAYS the case.

map1 Wrote: ------------------------------------------------------- > That’s what I said, that it might be true for > contracts traded in the US, not for futures in Tel > Aviv. D suggests that’s the way futures are > quoted, which is not ALWAYS the case. So your point is that D) is wrong too. I agree with that. For example on EuroNext the euro/\$ futures contract is \$20000 and the contract is quoted in euros/dollar. There is some concern that if the Bush legacy continues, the contract will fall below the minimum threshold and have to be delisted. Edit: Maybe the question means most likely accurate in which case C) is the asnwer.

I picked A based on process of elimination. All the others are obviously false

Why would you think C) is false? (I think C is false too but can be fixed up with the term “notional value” instead of “value” and I will cut them some slack on that)

The answer is A but can someone explain that to me - how? S

I did above.

Thanks Joey, Might sounds silly but what does ED contract stands for? I have just heard of currency futures. S

eurodollar

When you get past 40 you think in terms of ED more often.