Abstract
It is commonly believed that the cheapest-to-deliver bond on a Treasury bond futures contract has extremal duration. The authors show that this is not always true. There is an easy rule for cheapest-to-deliver bonds which involves choosing a combination of extremal coupons and maturities. This rule is derived for a flat term structure and its extension to a non-flat term structure is given.
| Original language | English |
|---|---|
| Pages (from-to) | 39-55 |
| Number of pages | 17 |
| Journal | Journal of Computational Finance |
| Volume | 2 |
| Issue number | 3 |
| DOIs | |
| State | Published - 1999 |