I have a question on hedging eurodollar futures. If I understand correctly, the contract price for far out contract month is roughly based on the 3 month forward price on that month as seen today. So, for example, suppose today is June 25, 2007, the Sep 2008 contract trading today will roughly be based on 3-month Sep 2008 forward price as seen today. Now, if I go long this contract, I lock in the Sep 2008 forward rate prevailing today. Is this correct? Now I am looking at the hedging example on this page (http://www.riskglossary.com/link/eurodollar_future.htm). Suppose today is June 25, 2007, so the contracts of Exhibit 1 are available. A trader is to make a cash payment of $3 million on December 15, 2008, and she wants to hedge the interest rate risk. The article says she goes long three each of the Sep 2007, Dec 2007, Mar 2008, Jun 2008 and Sep 2008 contracts to hedge the risk. My question is why can't the trader just go long Sep 2008 contract today to hedge against the interest rate risk. The article also says by doing this, he effectively narrows his duration from 12 months to 3 months. But if he goes long Sep 2008 contract long today, hasn't he locked in the forward rate prevailing today and hedged away all of his risk, so effectively 0 duration? Any explanations appreciated.