A factor used to equate the price of T-bond and T-note futures contracts with the various cash T-bonds and T-notes eligible for delivery. This factor is based on the relationship of the cash.
Financial acronyms
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Tags: bonds pricing and analysis
The floor value of a convertible bond is the greater of 1. Conversion value 2. Bond investment value – value as a corporate bond without the conversion option (based on the convertible bond's cash flow if not converted). To estimate the bond investment value, one has to determine the required yield on a non-convertible bond. The conversion factor system As with other bond futures contracts, the CGB contract allows the seller to fulfill delivery obligations with one of the different bond issues which fit the delivery standards of each contract. The price of each deliverable bond will be calculated through the use of a conversion factor. Forward contracts and futures contracts. Journal of Financial Economics, 9, 373±382. Conversion factor risk in Treasury bond futures: Comment. Journal of Futures Markets 5(1), 115±119. Kane, A., and Marcus, A. Conversion factor risk and hedging in the Treasury- bond futures market. About CME Group. As the world's leading and most diverse derivatives marketplace, CME Group is where the world comes to manage risk. Comprised of four exchanges - CME, CBOT, NYMEX and COMEX - we offer the widest range of global benchmark products across all major asset classes, helping businesses everywhere mitigate the myriad of risks they face in today's uncertain global economy.
Description
Formula for the calculation of a bond's basis.
Formula
Legend
Conversion Calculator
| (CF_{bond} ) | Conversion factor |
| (clnPrice_{bond} ) | Bond clean price |
| (rtPrice_{Fut} ) | Market price of the futures contract |
Additional information related to this formula
Related definitions:
Download Bond Conversion Factor Formula Backstage Formula
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