The Futures Bond Basis: Government Bond Futures and Basis Trading

By Moorad Choudhry

Basis trading, also known as cash and carry trading, refers to the activity of simultaneously trading cash bonds and the related bond futures contract. an asset and its price for future delivery as implied by the price of a futures contract written on the asset. Futures contracts are exchange-traded standardized instruments, so they are a form of what is termed a forward instrument, a contract that describes the forward delivery of an asset at a price agreed today. The simultaneous trading of futures contracts written on government bonds and the bonds themselves, basis trading, is an important part of the government bond markets, and in this book we review the essential elements of this type of trading. We begin with basic concepts of forward pricing, before looking at the determinants of the basis, hedging using bond futures, trading the basis and an introduction to basis trading strategy. We also look at the concept of the cheapest-to-deliver bond, and the two ways in which this is measured, the net basis and the implied repo rate. Kingdom gilt market. It is written in an accessible style and should prove of use to anyone with an interest or involvement in the government bond futures market.

• Format: Paperback
• Language: English
• ISBN: 0954544714
• ISBN13: 9780954544713
• Release Date: December 2003
• Publisher: YieldCurve Publishing
• Length: 200 Pages
• Weight: 0.44 lbs.
• Dimensions: 5.9" x 8.7"