This paper provides theoretical description of the evolution and market functions of interest rate futures. The paper contributes to the existing literature by documenting the evolution of interest rate futures and examining their market functions. Interest rate futures and their market functions have evolved on a number of exchanges over the last forty years as a result of worldwide dramatic fluctuations in interest rates. Most of these interest rate futures contracts are usually written on coupon bonds as the underlying assets and interest rate futures have had rapid growth with trading volumes larger than the futures on stock indexes and currencies. The reason behind this growth has been
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