A financial future is a futures contract

Futures contract

In finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange...

 on a short term interest rate (STIR). Contracts vary, but are often defined on an interest rate index such as 3-month sterling or US dollar LIBOR.

They are traded across a wide range of currencies, including the G12 country currencies and many others.

Some representative financial futures contracts are:

United States

• 90-day Eurodollar *(IMM)
• 1 mo LIBOR  (IMM)
• Fed Funds 30 day (CBOT)

Europe

• 3 mo Euribor
  Euribor
  The Euro Interbank Offered Rate is a daily reference rate based on the averaged interest rates at which Eurozone banks offer to lend unsecured funds to other banks in the euro wholesale money market .-Scope:...
  
   (Euronext.liffe)
• 90-day Sterling LIBOR (Euronext.liffe)
• Euro Sfr (Euronext.liffe)

Asia

• 3 mo Euroyen (TIF)
• 90-day Bank Bill (SFE)

where

• IMM is the International Money Market of the Chicago Mercantile Exchange
  Chicago Mercantile Exchange
  The Chicago Mercantile Exchange is an American financial and commodity derivative exchange based in Chicago. The CME was founded in 1898 as the Chicago Butter and Egg Board. Originally, the exchange was a non-profit organization...
  
  
• CBOT is the Chicago Board of Trade
  Chicago Board of Trade
  The Chicago Board of Trade , established in 1848, is the world's oldest futures and options exchange. More than 50 different options and futures contracts are traded by over 3,600 CBOT members through open outcry and eTrading. Volumes at the exchange in 2003 were a record breaking 454 million...
  
  
• TOCOM is the Tokyo Commodity Exchange
  Tokyo Commodity Exchange
  The Tokyo Commodity Exchange is a non-profit organization, and regulates trading of futures contracts and option products of all commodities in Japan...
  
  
• SFE is the Sydney futures exchange

As an example, consider the definition of the International Money Market (IMM) eurodollar interest rate future, the most widely and deeply traded financial futures contract.

• There are four contracts per year: March, June, September, December (plus serial months)
• They are listed on a 10 year cycle. Other markets only extend about 2–4 years.
• Last Trading Day is the second London business day preceding the third Wednesday of the contract month
• Delivery Day is cash settlement
  Settlement (finance)
  Settlement of securities is a business process whereby securities or interests in securities are delivered, usually against payment of money, to fulfill contractual obligations, such as those arising under securities trades....
  
   on the third Wednesday.
• The minimum fluctuation (Commodity tick
  Commodity tick
  Futures exchanges establish a minimum amount that the price of a commodity can fluctuate upward or downward. This minimum fluctuation is known as a tick or commodity tick...
  
   size) is half a basis point
  Basis point
  A basis point is a unit equal to 1/100 of a percentage point or one part per ten thousand...
  
   or 0.005%.
• Payment is the difference between the price paid for the contract (in ticks) multiplied by the "tick value" of the contract which is $12.50 per tick.
• Before the Last Trading Day the contract trades at market prices. The Final Settlement Price is the British Bankers Association (BBA) percentage rate for Three–Month Eurodollar Interbank Time Deposits, rounded to the nearest 1/10000th of a percentage point at 11:00 London time on that day, subtracted from 100. (Expressing financial futures prices as 100 minus the implied interest rate was originally intended to make the contract price behave similarly to a Bond
  Bond (finance)
  In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
  
   price in that an increase in price corresponds to a decrease in yield).

Financial futures are extensively used in the hedging

Hedge (finance)

A hedge is an investment position intended to offset potential losses that may be incurred by a companion investment.A hedge can be constructed from many types of financial instruments, including stocks, exchange-traded funds, insurance, forward contracts, swaps, options, many types of...

 of interest rate swap

Interest rate swap

An interest rate swap is a popular and highly liquid financial derivative instrument in which two parties agree to exchange interest rate cash flows, based on a specified notional amount from a fixed rate to a floating rate or from one floating rate to another...

s.

See also

• forward rate agreement
  Forward rate agreement
  In finance, a forward rate agreement is a forward contract, an over-the-counter contract between parties that determines the rate of interest, or the currency exchange rate, to be paid or received on an obligation beginning at a future start date. The contract will determine the rates to be used...
  
  
• Currency future
  Currency future
  A currency future, also FX future or foreign exchange future, is a futures contract to exchange one currency for another at a specified date in the future at a price that is fixed on the purchase date; see Foreign exchange derivative. Typically, one of the currencies is the US dollar...
  
  
• Interest rate future
  Interest rate future
  An interest rate futures is a financial derivative with an interest-bearing instrument as the underlying asset.Examples include Treasury-bill futures, Treasury-bond futures and Eurodollar futures....