Cheapest to deliver (CTD) Treasury bond

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Uploaded by on Sep 1, 2008

In the last screencast, we noted the role of the conversion factor (CF) is to make the short (in a Treasury bond futures contract) almost indifferent in delivery among several different eligible government bonds. The "almost" indifferent refers to the idea that the short can maximize his/her profit by selecting the cheapest to deliver (CTD) bond. The cheapest to deliver (CTD) bond minimizes [cost to acquire -- proceeds received] or maximizes [proceeds received -- cost to acquire].

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  • Thank you !! Great job !!!

  • Thank you very much. Very simple and clear

  • Had no clue what this was about in my derivatives class, now everything makes so much sense. Thank you, truly.

  • sorry, what's the conversion factor??

  • Exactly what I was looking for, thank you.

  • Incredible, I'm writing an excel programme on just this topic. Thanks a million

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