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The Eurodollar Futures and Options Handbook by Galen Burghardt

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CHAPTER 21Structure and Patterns of Eurodollar Rate Volatility

A large part of the challenge in trading Eurodollar options correctly is in understanding the way volatility is viewed and the way Eurodollar futures rate volatilities behave. We have noted already that the Eurodollar options market thinks about rate volatility rather than price volatility. And we have noted briefly the difference between relative rate volatility and basis point volatility. In this section, we fill in more of the volatility picture with discussions of:

• Historical, implied, realized, and break-even volatilities

• Term structure of Eurodollar rate volatility

• Maturity structure of volatility (volatility cones)

• Volatility skews and implied rate distributions

Some ...

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