Andrew Allentuck

Saturday, July 26, 2003


The Eurodollar Futures and Options Handbook
ed. Galen Burghardt
McGraw-Hill, 2003
469 pages
ISBN 0-471-26608-6

Eurodollars, the consequence of America's spending beyond its means, have grown from a modest $182 billion outstanding in 1973 to a monstrous $4.9 trillion as of the end of 2001. Eurodollars did not require banks to hold deposits on reserve for their loans. This meant banks could lend Eurodollars more cheaply than regulated domestic dollars. Anyway, the USSR was unwilling to hold its pile of US cash in US banks and, increasingly, shady characters preferred to keep their US money out of the US and laws that mandated seizure of assets associated with organized crime.

Faced with the combination of rising inflation in the 1970s and the taming of inflation by Fed chairman Paul Volcker's garrote of double digit interest rates in the 1981 and 1982, the mountain of Euromoney sought liquidity and, by 1985, found it through the Chicago Mercantile Exchange's listing of options on Eurodollar futures.

In this definitive work on pricing and trading Eurodollar futures, University of Chicago scholar Galen Burghardt, who is also active in the Euromarket, has woven the work of two dozen experienced options and futures experts. The book covers the range of investable assets from Eurodollar time deposits to futures, hedges, swaps and swap hedges. The work is not too heavy on math, at least not beyond what a handheld financial calculator can handle, and the core issue of the book, pricing volatility, is dealt with in a workable form. For investors who want to trade Eurodollar media, this is an essential work.