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Prentice Hall Frank Fabozzi Bond Markets Analysis_11

Tham khảo tài liệu 'prentice hall frank fabozzi bond markets analysis_11', tài chính - ngân hàng, đầu tư chứng khoán phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | If LIBOR changes by 1 basis point 0.0001 then 1 000 000 X 0.0001 X 90 360 25 The Eurodollar CD futures contract is a cash settlement contract. That is the par-ties settle in cash for the value of a Eurodollar CD based on LIBOR at the settlement date. The Eurodollar CD futures contract is one of the most heavily traded futures contracts in the world. It is frequently used to trade the short end of the yield curve and many hedgers have found this contract to be the best hedging vehicle for a wide range of hedging situations. Treasury Bond Futures The Treasury bond futures contract is traded on the Chicago Board of Trade CBT . The underlying instrument for a Treasury bond futures contract is 100 000 par value of a hypothetical 20-year 8 coupon bond. The futures price is quoted in terms of par being 100. Quotes are in 32nds of 1 . Thus a quote for a Treasury bond futures contract of 97-16 means 97 and 16 32nds or 97.50. So if a buyer and seller agree on a futures price of 97-16 this means that the buyer agrees to accept delivery of the hypothetical underlying Treasury bond and pay 97.50 of par value and the seller agrees to accept 97.50 of par value. Because the par value is 100 000 the futures price that the buyer and seller agree to transact for this hypothetical Treasury bond is 97 500. The minimum price fluctuation for the Treasury bond futures contract is a 32nd of 1 . The dollar value of a 32nd for a 100 000 par value the par value for the underlying Treasury bond is 31.25. Thus the minimum price fluctuation is 31.25 for this contract. We have been referring to the underlying as a hypothetical Treasury bond. Does this mean that the contract is a cash settlement contract as is the case with the Eurodollar CD futures contract The answer is no. The seller of a Treasury bond futures who decides to make delivery rather than liquidate his position by buying back the contract prior tó the settlement date must deliver some Treasury bond. But what Treasury bond The CBT .