Trading Euribor and Eurodollar futures

By Stephen Aikin

Short-term interest rate futures (STIR futures) are one of the largest and most liquid financial markets in the world. The two main exchange-traded contracts, the Eurodollar and Euribor, regularly trade in excess of one trillion notional dollars and euros of US and European interest rates each day.

STIR futures have some very unique characteristics, not found in most other financial products. Their structure makes them very suitable for spread and strategy trading and relative value trading against other instruments such as bonds and swaps.

STIR Futures is a handbook for the STIR futures market. It clearly explains what they are, how they can be traded, and where the profit opportunities are. The book has been written for both aspiring and experienced traders looking for a trading niche in a computerised marketplace, where all participants trade on equal terms and prices.

This fully revised and updated second edition now includes:

– Details on the effects of the financial crisis on STIR futures pricing and trading.
– An in-depth analysis of valuation issues, especially the effects of term and currency basis when relatively traded to other financial products.
– A new section on using STIR futures to hedge borrowing liabilities.
– An in-depth analysis of relative value trades against bond and swap derivatives.
– Trading synthetic FX swaps using STIR futures.

Plus updated case studies and examples throughout and an even better explanation of the basics.

This book offers a unique look at a significant but often overlooked financial instrument. By focusing exclusively on this market, the author provides a comprehensive guide to trading STIR futures. He covers key points such as how STIR futures are priced, the need to understand what is driving the markets and causing the price action, and provides in-depth detail and trading examples of the intra-contract spread and strategy markets and cross-market relative value trading opportunities.

An essential read for anyone involved in this market.

Stephen Aikin has over 20 years financial markets experience,mainly in derivatives. He started his career in 1985, working for Kleinwort Grieveson, Credit Suisse and SBCI, principally as an equity options specialist. In 1988, he founded a proprietary trading company, which became a regulated member of the NYSE Euronext-liffe derivatives exchange, and this company experienced consistent operation and profitability throughout its 20 year operation. The company specialised in relative value trading, exploiting the relationships between financial instruments, principally in the field of interest rates and energy derivatives.

Stephen switched from trading to derivatives training in 2007 after the publication of "Trading STIR Futures - An introduction to short term interest rate futures", a book which was bulk purchased by the NYSE Euronext-liffe exchange for their interest rate education program. It was well received in the trading community for its ability to convey complex material in an intuitive and non-academic way. Stephen has also written several articles for European and American magazines on credit spread and yield-curve capture trading strategies.

Stephen now works as a capital markets trainer, specialising in derivatives and delivers approximately 60 training days a year to leading Banks such as Barclays Capital, Goldman Sachs, HSBC, RBS and Calyon in London and New York. He is also a Fellow of the Securities & Investment Institute (FSI) and holds an MSc in Financial Markets and Derivatives.

Stephen runs a number of intensive financial courses for traders, banking professionals and risk managers. Details may be found at stirfutures.co.uk. See also the STIR Futures Forum for questions, discussions and comments from the guru and other users.