Hedging Corporate Debt with U.S. Treasury Bond Futures

Article Abstract:

Methodology for assessing the cross-hedging effects of interest rate futures is promulgated and exemplified with Treasury bond futures applied to the price chance of corporation debts. Findings show that Treasury bond futures can furnish decent cover for alterations in corporate bond prices. The level of hedging effectiveness is linked to the bond quality and selected futures contract maturity. Treasury bond futures were better for hedging good quality corporate debt. Nearer futures were preferable in all cases to distant ones. Operational changes in the Federal Reserve Board in 1979 are provided for in this method of optimal hedging. Contract prices from the Chicago Board of Trade are used in this regression analysis. Tables of related statistical data are included.

Chicago Board of Trade (Illinois, United States)

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Cross Hedging CDs with Treasury Bill Futures

Article Abstract:

The three-month and six-month hedging using T-bill futures in bank certificates of deposit (CD) activity from 1976 to 1980 is analyzed. Cross hedging offers increased liquidity. A rate-oriented model is featured, as are tables of cross hedging data after transaction costs. No real advantage was accorded to the use of optimal, as compared to naive, ratios. Hedged positions were thought to have less risk and lower borrowing costs.

Finance, Risk (Economics), Certificates of deposit

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Multifactor and analytical valuation of of Treasury bond futures with an embedded quality option

Article Abstract:

The development of a multifactor solution for the pricing of Treasury bond futures, based on the Gaussian framework, is described. The inclusion of an embedded quality option in the solution is discussed.

Portugal, Pricing Policy, Methods, Usage, Evaluation, Pricing, Treasury securities, Gaussian processes, Product price, Treasury bonds

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