2 votes

what is the rationale behind CTD (Cheapest to Deliver) mechanism in bond futures

Sometimes there is not much liquidity in a particular bond issue and it could become scarce and shoot up in price vis a vis others. Then there would be accusations that someone is manipulating the ...
  • 9,935
2 votes
Accepted

Discount factors curve shapes

If the input data is correct and there aren't any calculation errors, then the discount curve should be decreasing (just like your second chart). Using a no-arbitrage argument, Hagan & West (2007) ...
  • 1,175
1 vote

treasury bond futures rolldown

Roll in futures language is typically defined in terms of the futures curve, i.e. the difference between (successive) contracts, say RXM3 minus RXH3. You can find more information on this for STIR ...
  • 1,175
1 vote

Discount factors curve shapes

It might be helpful to think about the forward rates that your curve implies. While instantaneous rates are not very intuitive they are mathematically simple, so if we have a discount curve of $Z(t)$ (...

Only top scored, non community-wiki answers of a minimum length are eligible