Information in the Term Structure of Libor Interest Rates
28 Pages Posted: 29 Sep 2005
Date Written: September 12, 2005
Abstract
Using Eurodollar futures prices to assess information in the term structure of interest rates we find that Eurodollar futures rates have power to forecast period profits in the Eurodollar futures market (based on LIBOR). The more interesting discovery is that short-term implied futures rates have very little power in forecasting future changes in spot rates in the Eurodollar futures market. Instead, evidence in our regressions suggests that information in the term structure of LIBOR is contained in the longer maturity Eurodollar futures contracts.
Keywords: Term structure, expectations hypothesis, Eurodollar futures, LIBOR
JEL Classification: E43
Suggested Citation: Suggested Citation
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