I would appreciate it if you can explain the meaning of these terms.
If I can borrow at 50 basis points above LIBOR which is at 5%. Does this mean we automatically assume I am borrowing at 5.5%?
What does it mean when a contract size of £500, 000 has a tick size of £12.50??
Also, what's an opening/settlement when dealing with interest rate futures?
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Terminologies
8y ago#1Yes - 50 basis points above 5% is 5.50%
It means the profit or loss on a movement of 0.01 in the futures price is $12.50 per contract. (3/12 x 0.01% x $500,000 = $12.50).
These are both explained in full in my free lectures (and you never actually need to use ticks in the exam).
Opening and settlement have only been mentioned once in the exam (by the previous examiner). Opening is the price at the start of the day; settlement is the price actually used.
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