1 thought on “Study of Special Studies of Treasury Futures: How to find the cheapest delivery coupon”

  1. Treasury futures are about to be launched. The pricing and strategy is the most concerned issue for investors. One of the core issues is to find the cheapest delivery coupon (CTD coupon) in different market environments.
    The virtual standard coupon system implemented in the gold, and the state bonds can be transformed into standard coupons through fixed conversion factor. When the converted factor of CICC is assumed that the discount rate of each time in the future is 3%, the delivery ticket obtained through the conversion factor is overvalued or underestimated.
    The main method of finding CTD coupons: the maximum hidden repurchase interest rate method, base difference and net foundation method.
    The most reliable method is the maximum hidden repurchase interest rate method. The implicit repurchase interest rate reflects the theoretical yields that the futures of futures buying government bonds and used for delivery. The highest yield is the CTD coupon.
    The base difference method reflects the cost of buying the spot of the national bond for delivery. The smallest foundation is the CTD coupon. On the basis of the former, the principal of the net foundation has taken into account the rate of interest rates and the chance of funds (or financing costs) at the holding period.
    The experience rules of the CTD coupon of the Introduction of Treasury Bond Futures based on the maximum hidden repurchase interest rate law are as follows:
    (1) When the rate of return on the national debt is greater than that of the standard coupon ticket, the larger the time, the larger the time, the more It is possible to become a CTD coupon; and when the yield curve, the steeper, the long -term national debt, the more likely it is to become a CTD coupon.
    (2) When the rate of return on the national debt is less than 3%of the standard coupon ticket, the smaller the time period, the more likely it is to become a CTD coupon; and when the yield curve is flat May be a CTD coupon.
    (3) For different moments T, CTD coupons may be different. However, according to historical experience, during the contract period, the general CTD coupons change less.

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