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How can we use interest rate futures in hedging if we want to borrow loan after 8 months …is there any option or we only can buy future at its nearest 3 month maturity date to the start of our loan period. E.g today is 1st jan , i want loan on 1st sep .. how do we hedge ..apart from buying future in the beginning of june which will mature on 1st sep ..
ThankyouYou always use the future that matures the soonest after the date on which the loan starts. There are no interest rate futures that mature on 1 September – the only maturity dates are 31 March, 30 June, 30 September and 31 December, so you would choose September futures (and close the futures deal on 1 September).
Do watch my free lectures on this (but appreciate that you cannot be asked calculation questions on managing interest rate risk).
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