TY  - JOUR
AU  - Koh,Annie
AU  - Levich,Richard M.
TI  - Synthetic Eurocurrency Interest Rate Futures Contracts:  Theory and     Evidence
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3055
PY  - 1989
Y2  - August 1989
UR  - http://www.nber.org/papers/w3055
L1  - http://www.nber.org/papers/w3055.pdf
N1  - Author contact info:
Richard M. Levich
Stern School of Business
New York University
44 West 4th Street
New York, NY 10012
Tel: 212/998-0422
Fax: 212/995-4256
E-Mail: RLEVICH@STERN.NYU.EDU
AB  - In this paper, we develop a theoretical (arbitrage) pricing model for a Eurocurrency interest rate futures contract and measure its hedging effectiveness. This synthetic Eurocurrency interest rate futures contract is obtained by combining exisiting Eurodollar interest rate futures contracts with near term and far term currency futures contracts based on the covered interest rate parity relationship. In theory, the cash flows of the synthetic  contract perfectly replicate the cash flows of a Eurocurrency interest rate futures contract. Our empirical results show that the synthetic contracts are relatively efficient in hedging non-dollar borrowing rates. These results have implications for the practice of hedging non-dollar interest rate risk and for the development of actual Eurocurrency interest rate futures markets.
ER  -