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Interest Rate Futures: Elements of a Successful Financial Innovation

In: THE WORLD SCIENTIFIC HANDBOOK OF FUTURES MARKETS

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  • Bluford H. Putnam

Abstract

U.S. interest rate futures, including Eurodollar time deposit and U.S. Treasury futures contracts, comprise one of the most successful financial innovations ever created. This chapter examines why and how U.S. interest rate futures became so popular. Sections cover the critical characteristics of exchange-traded futures that foster investor confidence to use the products, the historical context and process of innovation that led to the creation of U.S. interest rate futures, how the standardization of interest rate futures allowed interaction with other credit markets, and the importance of interest rate expectations and an appreciation of interest rate uncertainty. We close with some brief remarks relevant to the role interest rate risk management plays in the growth of a dynamic economy.

Suggested Citation

  • Bluford H. Putnam, 2015. "Interest Rate Futures: Elements of a Successful Financial Innovation," World Scientific Book Chapters, in: Anastasios G Malliaris & William T Ziemba (ed.), THE WORLD SCIENTIFIC HANDBOOK OF FUTURES MARKETS, chapter 11, pages 349-379, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814566926_0011
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