In the recent article about interest rate management, in the futures section.
Loss on the futures market: (0.9436 – 0.9478) × D500,000 × 3/12 × 90
I wonder where does the 3/12 come from?
In June 15 Question 4, the futures question.
Gain on the futures market: (95.84-95.44) x $25 x 68 = $68 000
I wonder why they do not have 3/12?
Many thanks.
Interest rate management question
8y ago#1It is always 3/12 because futures are always 3 month futures. This means that when we calculate the gains or losses, we always do it as though the difference is equivalent annual interest rate which we calculate for just 3 months.
You really should watch my free lectures on interest rate risk management where all of this is explained in detail, with examples.