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Full-Text Articles in Business
Three Essays On The Interest Rate Forward-Futures Differential 1. Empirical Investigation Of The Size And The Nature Of The Eurodollar Futures-Foward Differential 2. Decomposition Of The Interest Rate Forward-Futures Price Differential 3. How Much Premium Is There For Interest Rate Futures?, Andrei Shynkevich
LSU Doctoral Dissertations
This dissertation analyzes a series of issues that surround both the theoretical modeling and the empirical estimation of the forward-futures differential, commonly known as the convexity adjustment. Opposite to theoretical implication, I find that the magnitude of the forward-futures rate differential is much smaller than what was expected, and that its sign is negative on many occasions. Neither asynchronicity bias, nor the unconventional feature of the Eurodollar futures pricing can explain the observed phenomena. The term structure interpolation error and the two business day lag between the fixing (settlement) date and the transaction (value) date to which the implied forward …