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elearning > Bond futures

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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 menuBond futures deliveryBond futures specifications

Bond futures basisBond futures net basisBond futures summary

  • 40 minutes
  • 10 question multiple choice
  • 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

Bond Futures - the details

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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11th August 2014

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