If interest rate futures are ________, institutional investors can enhance returns in the same way that they do in equities.

Question

Quizplus · Accepted Answer

If interest rate futures are mispriced, institutional investors can use their expertise to identify the mispricing and take advantage of it to enhance their returns. Just like in equities, if the market misprices a stock, investors can buy or sell it accordingly to earn a profit. If interest rate futures are correctly priced, there is no room to make excess returns. If they are in short supply, it may lead to an increase in their price, but it does not necessarily enhance returns for investors.

If Interest Rate Futures Are ________, Institutional Investors Can Enhance