My understanding is when you take a short position in a future, you are agreeing now to sell a specific quantity of a specific asset at a specific future date for an agreed price. However, with a short interest rate future, what exactly are you agreeing to sell?
You could think of it as being a future on a short term gilt. But the interest rate future is generally just an agreement to pay cash based on the prescribed formula relating to interest rates.
Thank you. I'll just remember with a long position, if interest rates go up, value of gilt and so value of futures contract goes down and you've made a loss. Cheers.
