Short-Term Interest Rate Futures

Abstract

Not long ago futures trading was limited to contracts for agricultural and other commodities. Trading in futures contracts for financial instruments began in the early 1970s, after almost a decade of accelerating inflation exposed market participants to unprecedented levels of exchange rate and interest rate risk. Foreign currency futures, introduced in 1972 by the Chicago Mercantile Exchange, were the first financial futures contracts to be traded. The first interest rate futures contract, a contract for the future delivery of mortgage certificates issued by the Government National Mortgage Association, began trading on the floor of the Chicago Board of Trade in 1975. Today financial futures are among the most actively traded of all futures contracts.