Eurostrip

AAA

DEFINITION of 'Eurostrip'

A series of consecutive three-month futures contracts based on U.S. dollar-denominated deposits in foreign banks. Eurostrips, also called eurofutures strips or eurodollar futures strips, are a type of interest-rate derivative and, like swaps, are used to hedge against changes in interest rates. A one-year eurostrip would consist of four consecutive contracts, each lasting three months, that together have a duration of one year and thus provide an interest-rate hedge for one year.

INVESTOPEDIA EXPLAINS 'Eurostrip'

The end result of hedging using eurostrips is the same as that of using swaps, but the two investments are traded differently and have different cash flows. One choice may be more desirable than another at a given time to meet a specific investment objective, or both may be even used together. Eurostrips are popular because of their flexibility to be structured in many different ways to meet a variety of hedging needs.

RELATED TERMS
  1. Eurodollar

    U.S.-dollar denominated deposits at foreign banks or foreign ...
  2. Currency Futures

    A transferable futures contract that specifies the price at which ...
  3. Hedge

    Making an investment to reduce the risk of adverse price movements ...
  4. Futures

    A financial contract obligating the buyer to purchase an asset ...
  5. Eurodollar Bond

    A U.S.-dollar denominated bond issued by an overseas company ...
  6. Perfect Hedge

    A position undertaken by an investor that would eliminate the ...
Related Articles
  1. Offset Risk With Options, Futures And ...
    Investing Basics

    Offset Risk With Options, Futures And ...

  2. Practical And Affordable Hedging Strategies
    Options & Futures

    Practical And Affordable Hedging Strategies

  3. A Beginner's Guide To Hedging
    Options & Futures

    A Beginner's Guide To Hedging

  4. Hedging With Puts And Calls
    Markets

    Hedging With Puts And Calls

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center