Bond futures

CFA Level II Derivatives
#1

how do u know when to divide/multiply a bond future with the conversion factor

Also do you EVER add accrued interest @ futures expiration to the stipulated futures price?

Reference: R40 EOC, question 1

thanks!

#2

future price is always divided by conversion factor. A low conversion factor denotes a relatively expensive bond

accrued interest is deducted since you want the clean future price

#3

So the quoted futures price in a question does NOT take into accrued interest in the future? We will have to add it before figuring out the value?

#4

Yes… It does not take into account the accrued interest at the expiration of the future…