Eurodollar Contracts

Eurodollar contracts are financial agreements linked to U.S. dollars deposited in banks outside the United States, usually in Europe. These contracts are commonly used to hedge against interest rate risks or to speculate on future interest rates. They represent a way for investors and institutions to borrow or lend money in dollar-denominated terms, impacting global finance. The key aspect is that they are based on the London Interbank Offered Rate (LIBOR), which is the average interest rate banks charge each other for short-term loans. This makes Eurodollar contracts important in international finance and currency management.