What is a Eurodollar?

A Eurodollar is a dollar denominated deposit held in a bank outside of the United States.

Being located outside the US, Eurodollars are not subject to regulation by the Federal Reserve Board. Being outside the jurisdiction of the Federal Reserve the deposits are subject to fewer regulations than withing the US, allowing for higher margins.

The name is derived from the fact that originally, these deposits were mostly held in Europe. Such deposits are held in many countries across the globe, but they are still referred to as Eurodollars.

The term Eurodollar also refers to the financial futures contract traded at the Chicago Mercantile Exchange. It is one of the most actively traded futures contracts in the world, making it a highly liquid market.