Exam: CH 6 Interest rate futures Flashcards
What are day count conventions?
- Defines the way in which interest is accrued over time
- Day count is expressed in
the form X/Y when computing interest between two dates
US Treasury Bonds Day counted as?
- actual/actual reference period
- The interest earned between dates is the ratio of the number of days to the true length of the
period of time
US Corporate and Municipal Bonds Day counted as?
- 30/360
- we assume 30 days per month and 360 days per year when carrying out calculations.
US Money Market Instruments Day counted as?
- actual/360
- we calculate the actual number of days
that have elapsed and divide by 360 days per year when carrying out calculations.
what is the clean price?
- Quoted price
What is the dirty price?
- Cash price
When can treasury bond futures delivery occur?
- can occur anytime during the delivery month
How much is each contract valued at?
- Each contract is for delivery of $100,000 face value of bonds
What provisions do callable bonds contain?
- contains provisions in which it can be bought back at a certain price at certain times during its life
T/F. Any bond with 15 years to maturity on the first day of the delivery month and
is not callable within 15 years from that day can be delivered?
True
Treasury Note Futures Contracts with a maturity between what can be delivered?
6 1/2 and 10 years
What is the conversion factor?
- defines the price received by the party with the
short position
What is the most popular interest rate futures contract in the US?
- the 3-month Eurodollar futures contract traded on CME
- Eurodollar futures lock in an interest rate for a future period
What is a eurodollar?
- a dollar deposited in a US or foreign bank outside the US
What are the delivery months for a eurodollar future?
- March, June, September, December for up to 10 years into the future
- investor in 2019 can use Eurodollar futures to lock in an interest rate for
3-month periods that are as far into the future as 2029
