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Eurodollar

• This is an American dollar that has been deposited in a European bank or an U.S. bank branch located in Europe. It got there as a result of payments made to overseas companies for merchandise.

 
 Embedded terms in definition
 Branch
Merchandise
U
 
 Referenced Terms
 Arbitrage: The simultaneous buying and selling of a security at two different prices in two different markets, resulting in profits without risk. Perfectly efficient markets present no arbitrage opportunities. Perfectly efficient markets seldom exist.Strictly defined, buying something where it is cheap and selling it where it is dear; for example, a bank buys 3-month CD money in the U.S. market and sells 3-month money at a higher rate in the Eurodollar market. In the money market, often refers: (1) to a situation in which a trader buys one security and sells a similar security in the expectation that the spread in yields between the two instruments will narrow or widen to his profit, (2) to a swap between two similar issues based on an anticipated change in yield spreads, and (3) to situations where a higher return (or lower cost) can be achieved in the money market for one currency by utilizing another currency and swapping it on a fully hedged basis through the foreign-exchange market.Is a form of trading which attempts to profit by discrepancies in price due to location, funding, volatility, communications, response to information, or other differences. Typically, the price differences are small and only the quickest, most cost efficient or funding efficient parties participate. Compare with Risk Arbitrage.

 Commodity year color codes: Are used to distinguish different years available for trading. The following list reflects the 10 year Eurodollar strip.

  • White -Year 1
  • Red -Year 2
  • Green -Year 3
  • Blue -Year 4
  • Gold -Year 5
  • Purple -Year 6
  • Orange -Year 7
  • Pink -Year 8
  • Silver -Year 9
  • Copper -Year 10.

It should be noted that some of these colors have been used for different years by other exchanges over time. Codes are often used in conjunction with other information to avoid errors in order transmission and execution.

 Ed: Refers to the Eurodollar Futures and Options on Futures contracts.

 Either way market: In the interbank Eurodollar deposit market, an either-way market is one in which the bid and offered rates are identical.In the interbank Eurodollar deposit market, an either-way market is one in which the bid and asked rates are identical.

 Either way market: In the interbank Eurodollar deposit market, an either-way market is one in which the bid and offered rates are identical.In the interbank Eurodollar deposit market, an either-way market is one in which the bid and asked rates are identical.

 
 Related Terms
 Eurodollar bonds
Eurodollar deposits

<< Eurocurrency market Eurodollar bonds >>

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