Directional bet on LIBOR

Chuck · Post by **Chuck** » Thu Jan 29, 2009 12:33 am

For the PA, what's the best way to go long the 1-year rate? Interest rate swap is a minimum of $1m...any other ways?

ig0r · Post by **ig0r** » Thu Jan 29, 2009 2:04 am

Eurodollar white pack, will have to roll every 3 months

edit: just noticed the IRS comment, is $1mm notional exposure to much for what you want?

Chuck · Post by **Chuck** » Thu Jan 29, 2009 7:57 am

Thanks for your reply, I'll look into those. It's a little more than what I'm looking for...am trying to hedge variable mortgages tied to the 1-year LIBOR, but it's perfect for a net long position.

CFloon · Post by **CFloon** » Wed Feb 11, 2009 10:42 pm

Of course there are many questions, but it seems that you are sensitive to 1-Yr LIBOR every month for the next 30(?) years. This is really what caps and floors are all about. However, assuming this is for your home mortgage, maybe a string of eurodollar put options (midcurves, obtaining a bit of gamma) might serve you well for what you want.