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elearning > Bond futures
Learn about the following:
What bond futures can be used for. The importance of the contract specifications. The delivery process and cheapest to deliver. The gross and net basis.
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Course Summary
Bond Futures
- What bond futures can be used for
- The importance of the contract specifications
- The delivery process and cheapest to deliver
- The gross and net basis
40 minutes
10 question multiple choice test
1. Bond futures - introduction
- Link to cash market
- The delivery process
- Hedging use, advantage of liquidity
- Trading and leverage
- Arbitrage
2. Contract specifications
- UK Long Gilt contract
- Deliverable bonds
- Scaling process
- Conversion factors
- Invoice amount
3. The cheapest to deliver
- Cash and carry trade
- Implied repo rate
- Cost of carry
- Gross and net basis
- Implications of negative net basis
4. The net basis
- Example based on buying a cash bond and delivering it
- Why the net basis is negative
5. Summary
6. Test
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Zero coupon bonds 
5th March 2010
A bond is a long term debt obligation. It is sold by the borrower who is called the "issuer" in order to borrow money for the medium and long term. Typically a bond will have a maturity of between 2 and 20 years. The issuer can be a bank, company or government institution. Zero coupon bonds are unusual. They pay the investor no regular interest and although they represent a small proportion of the bond market zero coupon bonds can have advantages for both the issuer and investor.