Year-end seasonality in one-month LIBOR derivatives

Christopher J. Neely, Drew B. Winters

Research output: Contribution to journalArticlepeer-review

2 Scopus citations


This article examines the markets for one-month LIBOR futures contracts and options on those futures for a year-end price effect consistent with the previously identified year-end rate increase in one-month LIBOR. The cash market rate increase appears in forward rates and derivative prices, which allows the derivatives to properly hedge year-end interest rate risk. However, while the year-end effect appears in the derivative contract, these derivative contracts provide biased forecasts of both future interest rates and their volatility. The bias appears to be different at the end of the year for the LIBOR futures contract but not for the options contract. The information in the derivatives almost always subsumes simple benchmark forecasts.

Original languageEnglish
Pages (from-to)47-65
Number of pages19
JournalJournal of Derivatives
Issue number3
StatePublished - Mar 1 2006


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