CH15 - 15-1Chapter 15Bond Futures15-2Treasury Bond...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 15-1Chapter 15Bond Futures15-2Treasury Bond FuturesDelivery dateat least 15 yearsn$100,000 par per contract15-3There are many deliverable bonds. This prevents anyone from buying up all the deliverable bonds (cornering the market) and manipulating prices.But it adds a complication. The value of each bond in delivery must be specified by some formula.The “cheapest to buy” is the bond that would cost the least to buy and deliver. The cheapest to deliver sets the price of the futures contract.Cheapest to Deliver15-4Quoting Treasury Bond FuturesQuoted per $100 par in 32nds. Thus, .25.31)1000(32125.531,99$)1000(3217000,991799==+=-15-5Computing Changes in Futures Quotes❚Transform to dollars and cents:99 – 17 = 99,531.25– 99 – 15 = 99,468.75$62.50❚Compute the change in 32ndsand multiply by $31.25:99 – 17– 99 – 152 ×31.25 = $62.5015-6Futures Price on the Delivery Date Converges to the Spot Price on the Delivery Date.Delivery Date....
View Full Document

This note was uploaded on 06/07/2011 for the course FIN 4243 taught by Professor Dudley during the Spring '08 term at University of Florida.

Page1 / 16

CH15 - 15-1Chapter 15Bond Futures15-2Treasury Bond...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online