Give Two Examples of How Interest Rate Futures Can Be

question 35

Essay

Give two examples of how interest rate futures can be used to hedge against adverse interest rate movements by locking in either a price or an interest rate.

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Definitions:

Federal Reserve System

Central bank of the United States, whose main job is to control our rate of monetary growth.

Money Supply

The total amount of monetary assets available in an economy at any specific time.

Depository Institutions Deregulation

The process of removing government restrictions on banks and other financial institutions, aimed at increasing competition and efficiency in the financial sector.

Reserve Requirements

Regulations set by central banks determining the minimum amount of reserves a bank must hold against deposits.