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I would like to model Korean government bond futures. So far I know two concepts (just a short, incomplete description)

  1. cash-settled futures (e.g. Australia): The average yield of a basket of bonds is calculated and thereby a notional bond price. Quotation in $100-yield$.
  2. bond futures with physical delivery (e.g. Germany, US): Conversion factors for all bonds in a basket can be calculated which leads (with some more inputs) to a cheapest-to-deliver and the futures price corresponds more or less to the forward price of the cheapest-to-deliver (taking into account the conversion factor).

If I read this document, taken from page of "Korea exchange", correctly then the Korean 3yr and 5yr futures belong to class (1) and the 10 yr belongs to class (2). But when I go to Bloomberg it seems that all three futures contracts are of class (1) - yield based, cash settled.

Are there any experts around for these markets? Is it true that all 3 futures contracts work the same way, namely yield based and cash settled?

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up vote 1 down vote accepted

Checking calculation with Bloomberg it seems that all 3 Korean bond futures contracts are of type (1). The pdf in the link must be out-dated.

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