Оглавление
Stephen Aikin. STIR Futures
Publication details
About the Author
Preface. Who this book is for
What this book covers
How this book is structured
1. STIR Futures
2. The Mechanics of STIR Futures
3. Trading STIR Futures
4. Trading Considerations of STIR Futures
Supporting website
Introduction
STIR Futures – Quick Summary
1. STIR Futures. Introduction to STIR Futures. What are futures?
What are STIR futures?
Similarities with other futures contracts
Differences with other futures contracts
Derived from interest rates
LIBOR
EURIBOR
Movement of interest rates
Traded on exchanges
Where and how are they traded
Focus on the big two contracts
Trading is now computerised
Contract structure and general specifications
Contract specifications for the Eurodollar contract
Explanation of the contract specifications. Exchange
Notional value/unit of trading
Delivery months/Expiry cycle
Price quotation and minimum price movements. Method of quotation
Tick size
Price quotations
Last trading day and settlement
Margins
Buying and selling STIR futures
Buying and selling STIR futures as notional borrowings and lendings
Introduction to spreads and strategies
Spreads
Butterfly
A typical trader’s screen
The advantages of trading STIR futures compared to other financial products. Be a price maker, not a taker
Deep liquidity
A mathematical dependency
Low costs
Lower volatility
Many trading permutations
STIR Futures Pricing. Spot and forward rates
Deposit rates
Forwards market
STIR Futures Valuation. Basic pricing concepts
The value basis
Valuing Euribor futures
The discount curve
Interpolating discount factors to match the futures dates
Implied forward rates from futures versus theoretical forward rates
Drivers of the value basis
Advanced pricing concepts. Convexity and the convexity bias
Another method: stringing/chaining
Term risk (tenor basis)
Hedging with STIR futures
A simple hedging example
Hedging considerations
Principal at risk
Exposure period
Exposure basis
Margin flows
A more complex hedge…
Solution
Populating the example
The Drivers of STIR Futures Prices
The changing shape of the futures curve
The curve is constantly changing
Liquidity considerations of the micro-curve
Seasonal influences
Price-sensitive effects
Economic data
Employment
Gross Domestic Product (GDP)
Retail Sales
Consumer Price Index (CPI)
Producer Price Index (PPI)
Purchasing Managers Index (PMI)
University of Michigan Sentiment
Consumer Confidence
Durable Goods
Industrial Production
German IFO Business Survey
German ZEW Economic Sentiment Indicator
Housing
Interest rate announcements
U.S. Federal Reserve (‘Fed’)
European Central Bank (ECB)
Bank of England (BOE)
Central banker rhetoric
Case Study: An example of managing expectations – European Central Bank (ECB) 2011
Correlated markets
Uncorrelated markets
Equities
Oil
Event risk
Systemic risk contagion
Conclusion
Endnote
2. Mechanics of STIR Futures. Accessing the Markets
Clearing and settlement
Clearing member
Clearing house
Clearing process
Non-clearing members
Trading arcades
Margin requirements
SPAN
Comparison of futures settlement with equities and CFDs
Fixed and variable costs
Fixed costs
Variable costs
Liquidity and rebate schemes
STIR Liquidity Provider (LP)
STIR Discount Schedule
New Market Participants Scheme (NMP)
International Incentive Program (IIP)
New Trader Incentive Program (NTIP)
The choice of Clearing Member or Trading Arcade
Customer classification
Financial probity
Financial protection
Capital requirements and commissions
Technological ability
Trading arcades
Software and hardware
Trading algorithms
Implied pricing functionality
Examples
Implied prices – traders’ friend or foe? The good
The bad
Selecting an ISV
Price displays
Product column
Bid and offer quantity columns
Two or one-click dealing
Market depth
Last trade and volume
Spread matrix
Auto-spreaders and price injection models
Auto-spreader model
Auto-spreader
Price-injection model
Auto-traders
Risk management considerations
Pre-trade risk management
Post-trade risk management
Limitations of some ISV risk management systems
Rogue traders – when risk management fails
Griffin Trading Company
Sussex Futures Ltd
TRX Futures Ltd
Influences Regarding the Trader’s Choice of Markets and Contracts
Domicile and time zones
Remote Trading
Internet
Virtual private network (VPN)
Digital private circuit
Connectivity speed
Ping
Traceroute
3. Trading STIR Futures. Trading Opportunities: The Two Trades
Outright trading
Macro trading. Fundamentals-based macro view
Technically driven macro view
CASE STUDY: A trading example
Trading example – the money flows
Scalping
Losing money
Trading considerations for outrights
Spread trading
Spread Trading: Intra-Contract Spreads
Calendar spread
Example
Volatility increases with wider spread intervals
Yield curve effect on calendar spreads
Calendar spread matrix
Creating spreads from spreads
Converting longer interval spreads to three-month spreads
1. Columns
2. Rows
Reversing spread positions
Traders’ notes
International spread correlations. Comparing international calendar spreads
Butterfly spread
Traders’ notes
Condor spread
Traders’ notes
Introduction to strips, packs, bundles and stacks
Strips
Stacks
Packs
Problem of half-tick prices
Pack yields
Bundles
Intra-contract spreading with packs and bundles
Bundles versus packs
Pack or bundle versus a stack
Bundle yields
Summary – when to use strategies
Spread Trading: Inter-Contract Spreads
Price sensitivity
The swap spread
Drivers of the swap spread
The health of the banking sector
Corporate credit levels
The supply of government bonds
Availability of credit and liquidity
US mortgage hedging
Corporate issuance
Trading swap spreads using bonds and bond futures against STIR futures
Introduction to basic bond pricing
Bond market variations
Calculating bond prices in Excel
Clean and dirty bond prices
Price sensitivity to interest rate movements
Modified duration
Convexity
Determining the hedge ratio
Introduction to bond futures
The cheapest-to-deliver (CTD) bond
Gross and net basis
Calculating the net basis
The US two-year deliverable basket
Traders’ notes
Hedge ratios for bond futures
Calculating hedge ratios by regression analysis
The TED spread
Calculating the term TED spread
The TED spread and the swap spread
Trader’s notes: Buying and selling the TED spread
Constructing the term TED spread using derivatives
The choice of bundle, pack or stack
Pricing examples
Trading example 1. 28 Oct 2005
3 November 2005
Trading example 2. 22 Nov 2005
23 Nov 2005
Trader’s notes
OIS/LIBOR Spreads
European OverNight Index Average (EONIA)
Federal funds rate (Fed funds)
OIS Swap Example
Overnight index futures and OIS futures
US OIS/LIBOR spreads using Fed Funds/Eurodollar futures
Trading example: Fed Funds/Eurodollar spread
Trader’s Notes
Spreading STIR futures against swap futures
An introduction to interest rate swaps
Liffe € Swapnote
Pricing Swapnote
Forward swap rates and Swapnote forward yields
Trading € Swapnote against Euribor bundles
CBOT interest rate swap futures
Trading CBOT interest rate swap futures
Spreads between international STIR futures
FX forwards
FX swaps
FX futures
Synthetic FX swaps using STIR futures
Trading synthetic FX swaps
Summary – when to use the strategies
4. Trading Considerations for STIR Futures. Zero-Sum Game – Know the Players
Players
Hedge funds
Banks
Hedgers
Brokers
Independent traders/liquidity providers
Flippers/predatory algorithms
High frequency and algorithmic trading
Supporting cast
‘Winning’ trading systems
The pundits
How to Play. Specialisation
Key characteristics and considerations
Conviction versus dogma
Variant perception
Respect
The fourth dimension
Deep play
Trader’s nemesis
Game Play
The discovery process
Trigger point
Guide to technical indicators
Trend indicators
Moving averages
Simple moving average (SMA)
Weighted, exponential and volume-adjusted moving averages
Average directional movement index (ADX)
Vertical horizontal filter (VHF)
Example – SMA, ADX and VHF
Analysis
Traders’ notes
Oscillator and volatility indicators
Price oscillators
Bollinger bands
Average true range
Example – Bollinger bands, ATR, price oscillator
Analysis
Traders’ notes
Momentum and strength indicators
Relative strength index
Accumulation/distribution line (ADL)
Rate of change (ROC)
Example – RSI, ADL and ROC
Line indicators
Trend lines
Gann
Fibonacci
Conclusion
Endgame. A Day in the Life of a STIR Futures Trader
06:30
06:58
07:00
07:30
08:30
09:28
11:00
13:00
14:30
16:00
17:10
Ten Rules for Trading STIR Futures
Appendices
STIR Futures Contracts
Contract Specifications for Eurodollar, Euribor, Short Sterling and Euroswiss
Exchanges. Liffe
CME Group
Eurex
Some Clearing Members. ADM Investor Services International Ltd
ABN AMRO Clearing N. V
GH Financials Ltd
The Kyte Group Ltd
Marex Spectron Services
TRX Futures
Independent Software Vendors (ISV)
Trading Arcades
Key Policy Rate Changes (EUR, USD) EUR
USD
Bibliography
