CALCULATOR


Convexity Adjustment

This is a convexity adjustment calculator for deposit futures. It is based on the formula given in Option, Futures and Other Detivatives, John C Hull, 9th edition, p 143 which made reference to this document.

CONVEXITY ADJUSTMENT

The following are the field description for the calculator. While care has been taken for accuracy, it is still a simple calculator which depends on user logic. For instance, 'Value Date' must always be before the 'Expiry Date'. The rule, however is not enforced in the calculator. Similarly, 'Expiry Date' should always be third Wednesday of the relevant month.

Field Descriptions
Value Date

Valuation date of the futures contract.

Expiry Date

The last trading day of the futures contract

Tenor

The underlying tenor of the futures contract

Theoretical Maturity Date

Calculated from the information given in 'Tenor' and 'Theoretical Maturity Date'

Futures Price

Price of the futures contract.

Implied Futures Rate

100 - the price of the futures contract. This is a calculated field.

Implied Fut Con Rate

The equivalent continuous rate of the futures contract.

Convention

The day count convention for the futures contract. 'Actual/Actual' convention is not supported, despite being made available in the dropdown.

Day Count Factor

The day count factor. This is a calculated field.

Volatility

Annual volatility of the futures contract

Convexity Adjustment

The convexity adjustment in continuous rate form. It is a caluclated field and is deducted from 'Implied Fut Con Rate'

Fwd Rate Convention

The day count convention to be used for the forward rate.

Implied Forward Rate

The implied forward rate from the futures price after taking into account convexity adjustment

In practice, convexity adjustment are made on the full spectrum of the futures contract to construct a curve. Click here to do so.