Reading 33 Pg. 174 Example 2

[autocats15]

Where is the 400 coming from in the 3 month LIBOR calculation? This also shows up in Reading 32 on the top of page 140 in the optional section but I cannot find an explanation for this.
Thanks

 

[1recho]

autocats15 wrote:
Where is the 400 coming from in the 3 month LIBOR calculation? This also shows up in Reading 32 on the top of page 140 in the optional section but I cannot find an explanation for this.
Thanks

I am guessing it’s shorthand for 100 * 4 - Didn’t read the whole thing; but if Eurodollar contract face value is 100 and price is 96.XX then for a 360-day convention used for LIBOR, the interest rate is {profit = (100 - 96.XX)/100} / 4 quarters * 91 actual days / 90 conventional days = whatever.

 

[autocats15]

got it…that makes sense…they didn’t explain that at very well in the book
regards