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Derivative Bond Value

 
 
KKBHH
 
Reply Sat 7 Apr, 2018 03:26 pm
What is the actual portfolio value of a leveraged derivative bond whereby the derivative bond does not receive dividends or redemptions ?

For instance, a Two-Year Treasury Note future has a contract size of $200000 but what is the actual portfolio value of the futures contract ?

Or a Eurodollar future has a contract size of $1000000 but what is the actual portfolio value of the futures contract ?

Well, I'm not overly concerned with the time value of the futures contract but concerned with the value of the underlying bond when the dividends and redemptions are removed from the bond value.
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KKBHH
 
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Reply Sat 7 Apr, 2018 05:18 pm
@KKBHH,
For comparison I looked at the Nov 15 2018 Treasury Strip.

I subtracted the 98.94 Treasury Strip quote from the 104.26 Treasury Bond quote.

The result is 5.32 * 100 or $532 value for each $100000. That $532 value is for a bond without dividend or redemption.

But a bond derivative would be for the purpose of getting the price change relative to the 104.26 price.

Also, I don't have the actual redemption price on the 9% Treasury Bond.

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Now the above subject is an entirely different subject from one of my other subjects whereby neither dividends or return-of-capital are expected. One preferred stock gets distribution rights just in case and the other preferred stock gets the vote. Then both preferred stocks together convert to common stock with two preferred stocks making one common stock.

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KKBHH
 
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Reply Sat 7 Apr, 2018 06:08 pm
@KKBHH,
Too late to edit.

I suppose, for a comparison, subtract the current value of the Treasury Strip from the Treasury Strip redemption value. That allows for a gain in value without actually receiving the redemption. And a futures position is only concerned with gain or loss in value.

I'm probably looking for the dollar value of the bond position volatility.

I wonder if I can just net the difference between the low and the high bond position value during the time period that portfolio was exposed to the bond position and use that result as the portfolio value ?

That would be an after-the-fact result but allow a determination of portfolio compliance. Any number I can get accepted will allow a determination of portfolio compliance.
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