# Eurodollar futures convexity adjustments in stochastic volatility models

## Vladimir V. Piterbarg, Marco A. Renedo

#### Abstract

ABSTRACT

A formula that explicitly incorporates volatility smile, as well as a realistic correlation structure of forward rates, in computing Eurodollar futures convexity adjustments is derived. The effect of volatility smile on convexity adjustments is studied and is found to be significant.