Information in the Term Structure of Libor Interest Rates

28 Pages Posted: 29 Sep 2005

See all articles by Robert Brooks

Robert Brooks

Financial Risk Management LLC

Brandon N. Cline

Mississippi State University

Date Written: September 12, 2005

Abstract

Using Eurodollar futures prices to assess information in the term structure of interest rates we find that Eurodollar futures rates have power to forecast period profits in the Eurodollar futures market (based on LIBOR). The more interesting discovery is that short-term implied futures rates have very little power in forecasting future changes in spot rates in the Eurodollar futures market. Instead, evidence in our regressions suggests that information in the term structure of LIBOR is contained in the longer maturity Eurodollar futures contracts.

Keywords: Term structure, expectations hypothesis, Eurodollar futures, LIBOR

JEL Classification: E43

Suggested Citation

Brooks, Robert E. and Cline, Brandon N., Information in the Term Structure of Libor Interest Rates (September 12, 2005). Available at SSRN: https://ssrn.com/abstract=808684 or http://dx.doi.org/10.2139/ssrn.808684

Robert E. Brooks (Contact Author)

Financial Risk Management LLC ( email )

13157 Martin Road Spur
Northport, AL AL 35473
United States

HOME PAGE: http://www.robertebrooks.org

Brandon N. Cline

Mississippi State University ( email )

Mississippi State, MS 39762
United States
662.325.7477 (Phone)
662.325.1977 (Fax)