How is the theoretical futures price of a Treasury bond futures contract affected by the delivery options granted to the short?
Answer to relevant QuestionsExplain how the shape of the yield curve influences the theoretical price of a Treasury bond futures contract. Suppose that without an adjustment for the relationship between the yield on a bond to be hedged and the yield on the hedging instrument the hedge ratio is 1.30. Answer the below questions. (a) Suppose that a yield beta of ...Suppose that an institutional investor wants to hedge a portfolio of mortgage pass-through securities using Treasury bond futures contracts. What are the risks associated with such a hedge? Answer the below questions. (a) What is Euribor? (b) What is EURIBOR futures contract? Explain why the writer of an option would prefer an option with a high theta (all other factors equal).
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