page11 Can I know why when the price of interest rate future fall then there will be gain in future ? page 6 for bond future right , say the current price of bond is 110 then when increase to 120, when company sell bond they gain profit ? from high bond price? And why they lose on future ? when bond is 100 why they gain on future ? is it mean that when price of bond increase then price of future decrease ? and when we experience lose in future is it meant that we pay more on the interest on future ?
page 11 This follows from the definition of an interest rate future on page 5: as interest rates fall, interest rate futures prices rise. This is because the price of an interest rate future is stated as 100 - interest rate. page 6 Note that the company is the seller here (not the buyer). So, there position is the opposite way round to that on page 4 (your query in the other thread). So, as they've sold the future at 110, prices going up to 120 results in a loss on the future (As the future commits them to selling at a price of 110, when the current price is 120. A seller will do better from being free to sell at a higher price). This loss on their futures position will be offset by the fact that the company is (separately) also issuing new bonds and will be able to achieve a higher price for these as bond prices have gone up.
