unrelated to the cfa l1 curricullum… what are the non speculaltive uses of eurodollar futures? the only one i could think of was to hedge a floating rate U.S.D denominated bond issue…am i right or am i missing out something or maybe even entitely wrong? thanks
also what the difference between a Eurodollar future and a 1 month LIBOR future? arent they the same thing??
Eurodollar futures are based on 90-day (3-month) LIBOR, not 1-month LIBOR. Apart from that, the difference is the pricing: LIBOR futures are priced with an add-on yield (i.e., you buy the bond and the interest is added on to the $1,000 par at the maturity), whereas Eurodollar futures are priced with a discount yield (i.e., you buy the bond at a discount; the payoff is the $1,000 par, which includes the interest).
Hedging an existing dollar floating-rate exposure seems the most likely non-speculative use for Eurodollar futures.