"Options, futures and other derivative products" study notes (Chapter 6: Interest Rate Futures)

• 6.1 days the number of calculations and quotes practice

  Number of days: Define the interest accumulated over a period of time manner. Total 0

  Calculation formula is:
  $\ {Total number of days of the reference period FRAC} {the number of days between two dates within a reference period resulting} * Interest$

  There are three popular American Days metering habits:

  1. $\ Actual FRAC {} {} Actual$
  2. $\frac{30}{360}$: Corporate Bonds
  3. $\ FRAC} {360} {Actual$: US Money Market

  Discount rate (Discount Rate): interest income as a percentage of the face value of the final.

  US Treasury quote sometimes used discount rate mode;

  Long-term US Treasury bonds quoted in dollars and the dollar $\frac{1}{32}$Reported.

  Quote known as pure price (Clean Price);

  Cash price called interest-bearing price (Dirty Price);
  $Cash price quote = + interest payment from the start of a day of accrued interest$

• 6.2 US Treasury futures

  Conversion factor (Conversion Factor): the definition of the short side of the prices charged.
  $Cash settlement price of $ 100 per face value of the bond income = latest closing price of futures * conversion factor + accrued interest$
  cheapest deliverable bond(Cheapest-to-Deliver Bond)

• 6.3 Eurodollar futures

  Eurodollars : US dollars deposited in banks or foreign banks outside the United States.

  Eurodollar rates : Euro-dollar deposit interest rate between banks.

  Closing price payable (Invoice Price): the day of the transaction value as a basis for the settlement of the transaction price for the futures price 2:00 pm.

  Wild card rule (Wind Card Play): Non-free.

  Convexity adjustment (Convexity Adjustment)

• 6.4 based on futures hedging strategies duration of

  Based on the ratio of duration of the Hedge (Duration Based Hedge Ratio)

  Price sensitivity hedge ratio (Price Sensitivity Hedge Ratio)

• 6.5 for assets and liabilities portfolio hedging

  Duration matching (Duration Matching), also known as portfolio immunity (Portfolio Immunization): The average duration of the assets is equal to the average duration of its debt to hedge interest rate risk.

  Gap Management (GAP Management)

• References

1. "Options, futures and other derivative products." $John C\cdot Hull$ ; Yong, I'm the cable.