The Futures Bond Basis
The 2nd edition of The Futures Bond Basis, is an updated and revised version of Professor Moorad Choudhry's succinct but in-depth look at the government bond futures contract basis. It includes essential background on contract specifications and the theory of the basis. It also covers the concept of the cheapest to deliver; price and delivery data for a sample of gilt contracts; the drivers of the basis and its dynamics; the mechanics of basis trading; a detailed explanation of gross and net basis, and an explanation of the implied repo rate. The book uses examples from the UK gilt market, although the basic principles are applicable in any bond futures market.
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THE GOVERNMENT BOND BASIS
BASIS TRADING AND THE IMPLIED
THE FUNDAMENTALS OF BASIS TRADING
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accrued interest arbitrage Bank basis points basis trade bid-offer spread Bloomberg L.P. bond basis bond futures contract bond price bond's borrowing business days calculate cash bond cash flows cash market cheapest clean price contract delivery notices conversion factor cost counterparty CTD bond day when delivery days after notice December deliverable bonds delivery basket delivery month delivery month occurs Dirty price Figure final delivery day financing forward contract forward price funding futures exchange futures price gilt contract delivery government bond gross basis hedge ratio implied repo rate instrument interest rate interest rate swap investment issue last notice day LIFFE Long gilt contract LONG GILT FUTURE lots Cumulative day margin market maker maturity modified duration money market Notice EDSP Number notional coupon Number of lots option Pbond portfolio profit securities settlement price short future swap term transaction underlying asset Visit www.bloomberg.com volatility yield curve Yield to maturity Z-spread zero-coupon