Tuesday, March 22nd @ 11:00-12:30 PM (1011 Evans Hall)
The Financing Rate Implied by Equity Futures
Nick Gunther, UC Berkeley
This talk will explore the cost of implicit leverage associated with an S&P 500 Index futures contract and derive an implied financing rate. While this implicit financing rate was often attractive relative to market rates on explicit financings, the relationship between the implicit and explicit financing rates was volatile and varied considerably based on legal and economic regimes. Among other findings, regulatory reform in 2000 appeared to reduce significantly the spreads between this implicit financing rate and contemporaneous Eurodollar and US Treasury rates.