- This topic has 10 replies, 3 voices, and was last updated Oct-179:57 am by
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Up1
@alta12 @RaviVooda‌
For the 9th Itemset question 50, it ask about how to achieve the new target duration, in exhibits 2 there’s info on CTD and also future contracts, how do we know when to use CTD or futures? -
Up5
@vincentt two forms here
no of contracts = ((target duration – current)* price )/Dollar duration per futures contract
it is same as (((target duration – current)* price )/(duration of CTD bond * Price of CTD)) * CTD conversion factor
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Up3
@RaviVooda‌ can you tell me which reading and los is the first one?
So you’re saying the future price contract in exhibit 2 is just a distraction and it’s irrelevant in this context?
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Up3
@vincentt both formulas are in fixed income reading only. Both are in the same LOS.
in exhibit 2, had the duration of futures contract been given, we can calculate it. In this case since it is not given we can use the cheapest to deliver bond where all details are given
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Up2
50. Given Bixby’s new target duration and the data in Exhibits 1 and 2, the most appropriate action using Treasury futures is to sell:
A. 646 contracts.
B. 789 contracts.
C. 811 contracts.@RaviVooda‌ here u go
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Up2
@vincentt‌ we settle all bonds with Cheapest to deliver bonds
(4.25-5.5)/5.3 * (300,000,000/97750) * 1.12 =811 contracts
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Up2
@RaviVooda‌ so the future price is for anything apart from bonds?
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Up2
they look similar hence i missed that one out, thanks for point it out @RaviVooda‌
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Up2
@vincentt I too didn’t closely notice it until u asked me. When I solved problem, I however used CTD bond and got it right 🙂
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Up1
@vincentt, can you paste the question, I am not able to lcoate it.
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Up1
@vincentt @ravivooda I used CTD too. Didn’t notice the futures price distractor.
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