Explain how the shape of the yield curve influences the theoretical price of a Treasury bond futures contract.
Answer to relevant QuestionsExplain how the shape of the yield curve influences the theoretical price of a Treasury bond futures contract. Suppose that a manager wants to reduce the duration of a portfolio. Explain how this can be done using Treasury bond futures contracts. The following excerpt appeared in the following article, “Duration,” in the November 16, 1992, issue of Derivatives Week, p. 9: “TSA Capital Management in Los Angeles must determine duration of the futures contract it ...For a Treasury futures contract, how do you think the cost of carry will affect the decision of the short as to when in the delivery month the short will elect to deliver? In implementing a protective put buying strategy, explain the trade-off between the cost of the strategy and the strike price selected.
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