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convfactor

Bond conversion factors

Description

example

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

example

CF = convfactor(___,Name,Value) specifies options using one or more name-value pair arguments in addition to the input arguments in the previous syntax.

Examples

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This example shows how to calculate CF, given the following RefDate, Maturity, and CouponRate.

RefDate  = [datetime(2002,12,1);
               datetime(2003,3,1);
               datetime(2003,6,1);
               datetime(2003,9,1);
               datetime(2003,12,1);
               datetime(2003,9,1);
               datetime(2002,12,1);
               datetime(2003,6,1)];
 
Maturity = [datetime(2012,11,15);
               datetime(2012,8,15);
               datetime(2012,2,15);
               datetime(2011,2,15);
               datetime(2011,8,15);
               datetime(2010,8,15);
               datetime(2009,8,15);
               datetime(2010,2,15)];
 
CouponRate = [0.04; 0.04375; 0.04875; 0.05; 0.05; 0.0575; 0.06; 0.065];
 
CF = convfactor(RefDate, Maturity, CouponRate)
CF = 8×1

    0.8539
    0.8858
    0.9259
    0.9418
    0.9403
    0.9862
    1.0000
    1.0266

This example shows how to calculate cf, given the following RefDate, Maturity, and CouponRate for a German bond.

cf = convfactor(datetime(2009,3,10),datetime(2018,1,4), .04,.06,3)
cf = 0.8659

Input Arguments

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Reference dates for which conversion factor is computed (usually the first day of delivery months), specified as an N-by-1 vector using a datetime array, string array, or date character vectors

To support existing code, convfactor also accepts serial date numbers as inputs, but they are not recommended.

Maturity date, specified as a N-by-1 vector using a datetime array, string array, or date character vectors.

To support existing code, convfactor also accepts serial date numbers as inputs, but they are not recommended.

Annual coupon rates for underlying bond, specified as an numBonds-by-1 vector in decimals.

Data Types: double

Name-Value Arguments

Specify optional pairs of arguments as Name1=Value1,...,NameN=ValueN, where Name is the argument name and Value is the corresponding value. Name-value arguments must appear after other arguments, but the order of the pairs does not matter.

Before R2021a, use commas to separate each name and value, and enclose Name in quotes.

Example: CF = convfactor(RefDate,Maturity,CouponRate,'Convention',2)

Conversion factor convention, specified as the comma-separated pair consisting of 'Convention' and a N-by-1 vector using the following values:

  • 1 = US Treasury bond (30-year) and Treasury note (10-year) futures contract

  • 2 = US 2-year and 5-year Treasury note futures contract

  • 3 = German Bobl, Bund, Buxl, and Schatz

  • 4 = UK gilts

  • 5 = Japanese Government Bonds (JGBs)

Data Types: double

Irregular first coupon date, specified as the comma-separated pair consisting of 'FirstCouponDate' and a N-by-1 vector using a datetime array, string array, or date character vectors.

To support existing code, convfactor also accepts serial date numbers as inputs, but they are not recommended.

Reference semiannual yield, specified as the comma-separated pair consisting of 'RefYield' and an N-by-1 vector in decimals.

Data Types: double

Forward starting date of payments, specified as the comma-separated pair consisting of 'StartDate' and a N-by-1 vector using a datetime array, string array, or date character vectors.

To support existing code, convfactor also accepts serial date numbers as inputs, but they are not recommended.

Output Arguments

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Conversion factors against the 6% yield par-bond, returned as an N-by-1 vector.

More About

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Conversion Factors

Conversion factors of US 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 US Treasury bonds, verify the output of convfactor by comparing the output against the quotations provided by the Chicago Board of Trade (https://www.cmegroup.com/company/cbot.html).

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

For UK Gilts, verify the output of convfactor by comparing the output against the quotations provided by Euronext (https://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 (https://www.jpx.co.jp/english/).

References

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

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

Version History

Introduced in R2009b

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