Economic Review

Virtually all financial innovation in the U.S. money market during the past 20 years has centered on interest rate derivatives, including futures and swaps. Furthermore, money market futures--especially futures contracts on Eurodollar time deposits--have been at the vanguard of the recent explosion of trading activity in interest rate derivatives. While futures markets traditionally have been viewed as markets for the transfer of price risk, recent research shows that they may serve other important economic functions as well.