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Eurodollar deposit and rollover eurocredit position indexed

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Recall the FRA problem presented as Example 11.2. Show how the bank can alternatively use a position in Eurodollar futures contracts to hedge the interest rate risk created by the maturity mismatch it has with the $3,000,000 six month Eurodollar deposit and rollover Eurocredit position indexed to three-month LIBOR. Assume that the bank can take a position in Eurodollar futures contracts that mature in three months and have a futures price of 94.00.

Reference no: EM131115193

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