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Dear sir,
Example 3 from the free lectures. In the example 3 you increase 6M to 12M during calculation. For me increasing the sum is a bit confusing in this regard I tried to solve the example in this way.
(92-90)/200*6M. (200 from 6/12*100). I came to the similar answer.
Could you please check and share with your comments, whether this is correct?
Thanks.
What you have done is fine for this example, but it is only a very basic example to explain the concepts.
In later examples (and in exam questions) the futures have to be dealt in fixed size contracts and then what I did in the lecture becomes important. The futures are only ever 3 month futures and therefore only protect against interest rate changes for 3 months. If you need to protect over a period of 6 months then you need to use twice as many (6 months/3months) three month futures.
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