Research On The Theory Of Treasury Bond Futures Pricing And Empirical Analysis

Experienced the failure of the pilot in 1992,our country' Treasury bond futures revived and traded officially nearly two decades later on September 6,2013.In recent years,China's bond futures market gradually prosperous.The species continued to be rich.The five-year and ten-year Treasury bond futures have been listed on the transaction successfully.China Financial Futures Exchange first launched two-year Treasury bond futures simulated trading on February 27,2017.Since then,the three kinds of bonds futures varieties cover the short,medium and long-term bonds in the range of coupons,and build a series of bond derivatives that perfectly match the 1 to 10-year time interest rate curve,which will help financial institutions to further improve and strengthen interest rates risk management.The 18th national congress of the communist party of China actively promoted financial innovation and system reform,pointing out that it should speed up the multi-level and all-round development of capital market and maintain market stability.In the process of China's interest rate marketization,bond futures pricing is essential.At the end of 2016,the bond market appeared "black swan".With the Northeast Special Steel and other bonds breach of contract fermentation,the market turmoil,bond futures continued to plummet.At the end of 2016,the bond market appeared"black swan".With the Northeast Special Steel and other bonds breach of contract fermentation,the market is turbulent,and bond futures continued to plummet as well.The past "buy and hold" of the spot trading era has gone,which also makes the majority of financial institutions clearly recognize the necessary of "hedge".The present ticket holders,banks included,in the bond futures market have increasing demand of hedging cash positions.Reasonable bond futures pricing can reduce the potential arbitrage space as much as possible,improving the overall efficiency of the futures market.Bond futures give the short side the right to choose deliverable bonds,the long side can only passive to accept.At any point of the delivery month,there are many bonds available for the delivery of bond futures contracts,which have a wide range of coupon rate and duration.Due to the particularity of bond futures(standard ticket&delivery),the futures shorts will choose the lowest net delivery cost coupon,which is called the cheapest coupons(CTD).Bond futures pricing based on no arbitrage pricing theory.On the one hand,this paper estimates the implied repo rate of each deliverable bond and seeks the cheapest deliverable bond(CTD)in the futures contract.The three-point spline interpolation of the bond yield curve is used to price the theoretical price of discounted future cash flow using the bond market closing price and the instantaneous interest rate curve after interpolation.On the other hand,we make full use of the internationally unrivaled model of Hull-White,which is a mature non-arbitrage model.The model considers the rate-averaging regression property and provides a richer volatility environment while maintaining the analytic nature.The model has been used to construct the interest rate trinomial tree to simulate the instantaneous short-term interest rate,which is consistent with the initial term structure observed in the market,and the price of the futures contract at the delivery date can be calculated by working back through the tree.Through the empirical test of TF1603,the results show that the introduction of Hull-White in the pricing process can make the pricing more accurate,futures valuation spread between 0.5 to 0.6 yuan.The research of this paper provides some reference and supplement to the pricing of interest rate derivatives bonds.In this case,the quality option and the timing option are ignored.If the bond option is trading in the future,it can be used to correct the model and make the pricing result more accurate.