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The introduction of a Short-Term Interest Rate (STIR) future allows market participants to manage interest rate risk within a regulated market. This STIR future is based upon the 3 month Johannesburg Interbank Agreed Rate (JIBAR), and is referred to as the JIBAR future. It is a standardised product with 12 contracts extending out two years.
Benefits
- Can be used to hedge against short term interest rate movements out to two years
A simple, standardised product with a linear payoff profile Live quotes by liquidity providers on a Central Order Book (COB) Risk mitigation via daily margin calls
Who should use this product?
- Investors looking to enhance the long-term performance of a portfolio of assets
- Hedgers seeking to protect an existing portfolio against adverse interest rate movements
- Speculators hoping to make a profit on short-term movements in interest rates
- Arbitrageurs looking to profit from price differentials of similar products in different markets
How to use this product?
- The future is quoted as a yield, with the basis point value of ZAR 2.50 per basis point per contract
- The contract notional is ZAR 100,000 and the future settles at the 3 mth JIBAR fix on the expiry date
- When interest rates are expected to move up sell JIBAR futures
- When interest rates are expected to move down buy JIBAR futures
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Learn more about JIBAR futures (STIR) |
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