O'Reilly logo

Key Financial Market Concepts, 2nd Edition by Bob Steiner

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

Bond Futures, Conversion Factor and Cheapest-to-deliver (CTD)

Definition

A bond futures contract is an agreement on a recognised futures exchange to buy or sell a standard face-value amount of a bond, at an agreed price, for settlement on a standard future delivery date. In some cases, the contract is non-deliverable. In most cases, the contract is based on a notional bond.

The conversion factor, for any particular bond deliverable into a futures contract, is a number by which the bond futures delivery settlement price is multiplied, to arrive at the delivery price for that bond.

The cheapest-to-deliver (CTD) bond is the one which it is most cost-effective for the futures seller to deliver to the buyer if required to do so.

How are they used? ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required