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Reply to “A comment on 'A hedging deficiency in eurodollar futures'”
Author(s) -
Chance Don M.
Publication year - 2007
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.20254
Subject(s) - eurodollar , futures contract , mistake , hedge , economics , argument (complex analysis) , value (mathematics) , financial economics , mathematical economics , keynesian economics , mathematics , law , medicine , political science , statistics , ecology , biology
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