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.
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Chapter 20 - Free lectures - Interest rate RM part 2
4y ago#1What 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.
Thank you very much.
4y ago#3You are welcome :-)
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