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Reply to “A comment on 'A hedging deficiency in eurodollar futures'”

✍ Scribed by Don M. Chance

Publisher
John Wiley and Sons
Year
2006
Tongue
English
Weight
90 KB
Volume
27
Category
Article
ISSN
0270-7314

No coin nor oath required. For personal study only.

✦ Synopsis

Abstract

Kawaller's argument that a perfect hedge is possible with eurodollar futures is limited to the notion of a perfect accounting hedge, whereby the time value of money is ignored. In addition, his attempt to show the importance of sizing the hedge merely introduces a change to the problem, leading to a difference in our results that he erroneously believes is a mistake on my part. It is easy to show that his example is driven by an irrelevant distraction. I correct his example and show that had he worked the same problem I worked, he would have worked it the same way I did. © 2007 Wiley Periodicals, Inc. Jrl Fut Mark 27:195–201, 2007

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