Pilot Paper question 2 interest rate hedging

NNP10y ago

Please can you help me with this question: - for calculating the futures in part b the unexpired basis is 2/6, I would have thought it would just be 1/6. Using the method as per OT lectures I took theres to be 6months hence the difference should be the 0.54 * 1/6? Thanks

John MoffatTutor10y ago#1

'Now' is 1 January, and the June futures expire on 30 June, which is six months away. The borrowing will start on 1 May i.e. 4 months from now. Therefore there will be 2 months unexpired (May and June).

NNP10y ago#2

Thank you very much

John MoffatTutor10y ago#3

You are welcome :-)