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Could you pls help me this question.
I dont understand how to calculate expected future price.
In this Dec 2014, Q2, the expected future price= 100- New Libor- unexpired basis?
Is this formular for calculating expected future price?
If you know the interest rate on the date of the transaction then you can get the futures price using the fact that the basis falls linearly to zero over the life of the future.
If you don’t know the interest rate on the date of the transaction then you need to calculate the lock-in rate.
For more, you need to watch the free lectures where I go through both in great details.
I am sorry, but I really cannot type out the lectures here.
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Hi John,
thanks alot for your lectures and all the help you give us.
Regarding interest rate futures…is the futures price always less than the LIBOR?
No – it could be higher or lower (but it will always stay higher or always stay lower)
Sir,
I need help in the calculation of future outcome. According to the formula, it is:
“Receipt x size of the contract x number of contract x length of the contract / one year.”
My question is this: why is it that in Awan Co, the length of contract is 3/12 is used?
From my understanding, the length of investment should be 4 months (ie from 1 February – 1 June 2014).
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