FRM Part I · FRM Exam Part I · Interest Rate Futures
A trader holds a long position of 10 Eurodollar futures contracts (each with a $1 million face value and a 3-month rate). The futures price falls from 96.40 to 96.15. What is the change in the value of the position?
The position loses $6,250. The price drop of 0.25 equals 25 basis points, and each basis point on a $1 million, 3-month Eurodollar contract is worth $25. That is $625 per contract, so 10 long contracts lose $6,250.
- ALoss of $6,250Correct
- BLoss of $62,500
- CGain of $6,250
- DLoss of $2,500
Explanation
The price fell 0.25, which is 25 basis points. Each basis point is worth $1,000,000 × 0.0001 × 0.25 = $25 per contract. So the loss is 25 × $25 = $625 per contract, or $6,250 for 10 contracts. The gain of $6,250 has the wrong sign, since a long position loses when the price falls.
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