I am looking at some empirical methods to model the Treasury Futures wild card. I was looking through some sell side reports and found this statement.
"Wildcard fair BNOC is the net basis under which the wildcard is fairly priced assuming 1bp/2hr from 3-5pm each day"
I'm not exactly sure what it means but is it using Black Scholes to price an option during the delivery period with the following parameters using vol assumption?
Strike = Futures price
Spot = Current bond price
Vol = 1bp/2hr annualized
Risk Free Rate = 1.7%
Days = 30 days or or 0.083 years
Premium = Fair value of wild card?