Chapter 4 Crunch time

Question 1

what is the par value of T-notes and T-bonds, how are they quoted and what are they considered?

Answer 1

$100,000 | 1/32nds | long term financials

1% of $100,000 is $1000 & 1/32nd of $1000 is $31.25

Question 2

how are T-note & T-bond option premiums quoted?

Answer 2

1/64th of $1000, which is $15.625

Question 3

name the short term financials.

what are the maturities of short-term financials and what is their par value?

Answer 3

T-bills and Eurodollars

13 week (3 months) and a par value of $1,000,000

Question 4

how are T-bills and Eurodollars quoted?

Answer 4

they are quoted in terms of basis points and one basis point equals $25

Question 5

What are the different benchmark interest rates used for financial futures?

Answer 5

LIBOR
SOFR
AMERIBOR

Question 6

represents the cost of overnight, unsecured funding across all 50 states & Puerto Rico

Answer 6

AMERIBOR

Question 7

describe the futures contracts available on AMERIBOR? what is it’s multiplier and pricing convention?

Answer 7

7-day and 3-month

Multiplier: 100x
Pricing convention: 10,000 - (rate x 100)
for ex. settlement rate = 3.25%
10,000 - (3.25 x 100) = 10,000 - 325 = 9675

Question 8

the net profit realized on selling a bond futures contract and using the funds to buy a bond of the same value with delivery taking place on the associated settlement date

Answer 8

implied repo rate