You are long an $3 \times 6$ FRA and long a eurodollar futures contract expiring in 3 months.Assume the fixed rate in the FRA is the same as the rate locked-in via the eurodollar futures contract.If interest rates jump down by 100 basis points,

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When interest rates decrease, the value of being long an FRA (where you agree to pay a fixed rate and receive a floating rate) decreases because you are locked into paying a higher rate than the market now demands. Conversely, being long a eurodollar futures contract benefits from falling interest rates, as it implies higher future prices for the contract. However, the loss on the FRA is not fully offset by the gain on the eurodollar futures due to the convexity effect, which causes asymmetric changes in the values of these instruments with respect to interest rate movements. Therefore, you will lose more on the FRA than you will make on the eurodollar futures.

You Are Long An 3×63 \times 63×6 FRA and Long a Eurodollar Futures Contract Expiring in 3

You Are Long An $3 \times 6$ FRA and Long a Eurodollar Futures Contract Expiring in 3