Analysis Of CTD Basis Arbitrage Based On Chinese Bond Futures Pricing

Treasury futures which is an important point of China interest rate marketization process.It has been launched attracting the attention of academics and practitioners. Most domestic academic research on bond futures are based on the "3.27" incident analysis of the causes, and recommendations from the institutional and structural aspects of the transaction, preventing bond futures own risk. In this paper, we start from the pricing of treasury bond futures and use empirical data to study the accuracy of the carry-of-cost pricing model and interest rate term structure model and make a comparation between them. The results showed that:the interest rate term structure pricing model is more accurate than the carry-of-cost pricing model overall, and the two-factor rate term structure pricing model have a higher accuracy than the single factor model.The carry-of-cost pricing model does not take the value of the delivery option into account. The bond futures theoretical value obtained the carry-of-cost pricing model subtracts the bond futures actual price, the difference is the delivery option. In the empirical part of this article with two asset swap option pricing model to bond futures delivery option pricing, the results further support the original theory that the delivery option value model and cost roughly the difference between the price of Treasury futures and the actual holding. Finally, in the empirical part of the paper analyzes the relationship between stock and Treasury bond futures and interest rate term structure found between bond futures prices and spot prices significantly and positively correlated with medium-and long-term spreads significantly negatively correlated.Because bond futures Unlike other futures important feature is that it can be a lot of delivery coupons, short can choose to their advantage deliverable coupons for delivery, the delivery option that CTD coupon is the resulting. This article describes a method for determining the CTD coupons:implied repo rate and minimum base difference method, to compare these two, under normal circumstances, the order of these two methods CTD vouchers identified are interlinked. Inspection Basis arbitrage opportunities on the basis of CTD coupons on pricing, our results show that the difference has narrowed base bond futures trend should Short Basis.