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© K. Cuthbertson and D. Nitzsche Figures for Chapter 6 T-BOND FUTURES (Financial Engineering : Derivatives and Risk Management)

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© K. Cuthbertson and D. Nitzsche Figure 6.2 : Pricing a T-bond future Deliverable bond is 10% coupon which matures 15th February 2020. Deliverable bond pays semi-annual coupons of $(10/2) on 15th Feb. and 15th Aug. C/2 15th Feb. 1999 1st July 1999 (= t) 15th Aug. 1999 Buy Spot Bond AI t = (136/181)(10/2) = 3.76 11th Sept. 1999 (= T) 15th Feb. 2000 Delivery of Bond in Futures AI T = (27/184)(10/2) = 0.73 Arbitrage Period = 72 days 181 days184 days 136 days4527157 days

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© K. Cuthbertson and D. Nitzsche Figure 6.3 : T-bond futures spread 0t C/2 1st April: Instigate futures spread 1st June: Maturity of t-period futures 1st April : Futures spread = long June contract at F (t) and short September contract at F (T) 1st Aug1st Sept: Maturity of T-period futures 1st Feb C/2 31days Repo finance period

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