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November 5, 2015 at 11:33 pm
Very useful lecture. But just a quick one, do we always add the expired basis and add to Libor at start in estimating the lock-in rate?
John Moffat says
November 6, 2015 at 5:34 am
The lock in rate is always between the current future price and the current libor, and that determines whether you add or subtract.
November 6, 2015 at 8:36 am
Thanks but can u elaborate a little further please
November 6, 2015 at 5:42 pm
As the basis decreases, LIBOR and the futures price will get closer together.
September 20, 2015 at 9:53 pm
Hi, It is very good lectures and helps me a lot! I didn’t understand it when I took part in the exam in F9 and fully understood and will have confidence to pass it once!
October 11, 2014 at 6:39 pm
Thanks for the lecture. Please explain what is lock in rate and we would use it. Also if tick value is given do we use this to calculate profit and loss?
October 12, 2014 at 10:19 am
On the date of the transaction, we calculate the interest at what the rate is on that date, and calculate the profit or loss on the futures.
Because we are able to estimate the basis risk, we can calculate an effective interest rate on the date of the transaction that give the net effect (of using the actual rate and adding or subtracting the profit/loss on the futures). This is called the lock-in rate.
If the tick value is given, then you can use this to calculate the profit or loss on futures, but you do not actually need to use it – you can calculate the profit or loss in the normal way (it will give the same result). I never bother using ticks
August 2, 2014 at 5:32 pm
very nice lecture God bless you.
August 2, 2014 at 7:04 pm
May 19, 2014 at 2:50 am
Very good way of teaching. Wonderful lectures, easy to understand. It clarifies my confusions about very difficult topic about derivatives. God bless you.
October 28, 2013 at 7:51 am
Can I ask how to calucate the profit or loss on the interest rate future when there’s a tick value involved? thanks.
October 28, 2013 at 4:17 pm
You never actually need to use ticks.
However, if you want to use them then you calculate the difference between the buy and sell prices in numbers of ticks (a tick is 0.01), multiply by the numbers of contracts, and then multiply by the tick value.
October 29, 2013 at 3:19 am
Thanks for making a point, clarifing a lot.
October 29, 2013 at 7:26 am
You are welcome
August 19, 2013 at 9:25 am
very nice lecture. God bless
September 27, 2012 at 2:03 pm
June 5, 2012 at 6:35 am
Thanks a lot!
December 3, 2011 at 6:31 am
Very good lectures!!!. Thank you very much!!!
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