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.


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.

  1. Eurodollar Bond

    A U.S.-dollar denominated bond issued by an overseas company ...
  2. Futures

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

    U.S.-dollar denominated deposits at foreign banks or foreign ...
  4. Hedge

    Making an investment to reduce the risk of adverse price movements ...
  5. Perfect Hedge

    A position undertaken by an investor that would eliminate the ...
  6. Currency Futures

    A transferable futures contract that specifies the price at which ...
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  1. How are futures used to hedge a position?

    Futures contracts are one of the most common derivatives used to hedge risk. A futures contract is as an arrangement between ... Read Full Answer >>
  2. What is the difference between hedging and speculation?

    Hedging involves taking an offsetting position in a derivative in order to balance any gains and losses to the underlying ... Read Full Answer >>
  3. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  4. How do futures contracts roll over?

    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  5. Why do companies enter into futures contracts?

    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>
  6. What does a futures contract cost?

    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>

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