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

Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  3. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  4. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  5. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  6. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
Trading Center