Why do we need to divide DDctd by the conversion factor? Since the futures contracts that we will be receiving are the cheapest to deliver contracts and have a duration of DDctd, wouldn't the formula (DDt - DDp) / DDctd work to find the numbers of futures contract we want? I guess I am missing / misunderstanding something.
Any insights and comments are appreciated!作者: cityboy 时间: 2011-7-11 18:59
Remember you are trading the futures contract , not some unknown CTD contract. Ultimately you as the long receive some convenient ctd contract. But the price of this one may not match the futures price , so we actualy receive either more or less based on a multiplier which serves to align the price of the futures contract to the actual ctd.作者: Unforseen 时间: 2011-7-11 18:59
DDf = DDctd / (conversion factor). The futures' Duration may not be equal to CTD's. Can you confirm "Future Price=CTD Price/Conversion Factor"?作者: bodhisattva 时间: 2011-7-11 18:59
