convfactor - Bond conversion factors

Syntax

Description

CF = convfactor(RefDate, Maturity, CouponRate) computes a conversion factor for a bond futures contract.

CF = convfactor(RefDate, Maturity, CouponRate, 'ParameterName',ParameterValue ...) accepts optional inputs as one or more comma-separated parameter-value pairs. 'ParameterName' is the name of the parameter inside single quotes. 'ParameterValue is the value corresponding to 'ParameterName'. Specify parameter/value pairs in any order. Names are case-insensitive. convfactor computes a conversion factor for a bond futures contract, given a Convention value for a U.S. Treasury bond, German bond, U.K. Gilt, or Japanese Government Bond.

Input Arguments

RefDate	Reference dates, for which conversion factor is computed (usually the first day of delivery months).
Maturity	Maturity date of the underlying bond.
CouponRate	Annual coupon rate of the underlying bond in decimal.

Parameter–Value Pairs

Enter the following inputs only as parameter–value pairs.

Convention	Conversion factor convention. Scalar. Valid values are: 1 = U.S. Treasury bond (30-year) and Treasury note (10-year) futures contract 2 = U.S. 2-year and 5-year Treasury note futures contract 3 = German Bobl, Bund, Buxl, and Schatz 4 = U.K. gilts 5 = Japanese Government Bonds (JGBs) Default: 1
FirstCouponDate	Irregular or normal first coupon date.
RefYield	Reference semiannual yield. Default: 0.06 (6%)
StartDate	Forward starting date of payments.

Output Arguments

CF	N-by1 vector of conversion factors against the 6% yield par-bond.

Definitions

Conversion factors of U.S. Treasury bonds and other government bonds are based on a bond yielding 6%. Optionally, you can specify other types of bonds and yields using inputs for RefYield and Convention. For U.S. Treasury bonds, verify the output of convfactor by comparing the output against the quotations provided by the Chicago Board of Trade (http://www.cbot.com).

For German bonds, verify the output of convfactor by comparing the output against the quotations provided by Eurex (http://www.eurexchange.com).

For U.K. Gilts, verify the output of convfactor by comparing the output against the quotations provided by Euronext (http://www.euronext.com).

For Japanese Government Bonds, verify the output of convfactor by comparing the output against the quotations provided by the Tokyo Stock Exchange (http://www.tse.or.jp/english/).

Examples

Calculate CF, given the following RefDate, Maturity, and CouponRate:

RefDate  = {'1-Dec-2002';
               '1-Mar-2003';
               '1-Jun-2003';
               '1-Sep-2003';
               '1-Dec-2003';
               '1-Sep-2003';
               '1-Dec-2002';
               '1-Jun-2003'};
 
 Maturity = {'15-Nov-2012';
               '15-Aug-2012';
               '15-Feb-2012';
               '15-Feb-2011';
               '15-Aug-2011';
               '15-Aug-2010';
               '15-Aug-2009';
               '15-Feb-2010'};
 
 CouponRate = [0.04; 0.04375; 0.04875; 0.05; 0.05; 0.0575; 0.06; 0.065];
 
    CF = convfactor(RefDate, Maturity, CouponRate)

This returns:

CF =
        0.8539
        0.8858
        0.9259
        0.9418
        0.9403
        0.9862
        1.0000
        1.0266

Calculate cf, given the following RefDate, Maturity, and CouponRate for a German Bond:

cf = convfactor('3/10/2009','1/04/2018', .04,.06,3)

This returns:

cf =

    0.8659

References

Burghardt, G., T. Belton, M. Lane, and J. Papa, The Treasury Bond Basis, McGraw-Hill, 2005.

Krgin, Dragomir, Handbook of Global Fixed Income Calculations, John Wiley & Sons, 2002.

See Also

bndfutimprepo | bndfutprice | tfutbyprice | tfutbyyield | tfutimprepo

How To

• Bond Futures

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