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Hi, David

We use the dirty price when calculating the Theoretical futures price of a bond and later in the final step subtract the accrued interest to get the quoted price.

3 questions :

1.Why doesnt this dirty price usage and acc int subtraction come when we calculate forward prices for bonds? We simply use the clean quoted price subtract the pvc and solve.

2.Can we just use the clean price to calculate the future bond price and then not subtract the accrued interest in the later step?

3.The CTD which they mention is problems and give a conversion factor to calculate the futures settlement price..... How do they already know the CTD ? Is that just an assumption to make up the problem?

We use the dirty price when calculating the Theoretical futures price of a bond and later in the final step subtract the accrued interest to get the quoted price.

3 questions :

1.Why doesnt this dirty price usage and acc int subtraction come when we calculate forward prices for bonds? We simply use the clean quoted price subtract the pvc and solve.

2.Can we just use the clean price to calculate the future bond price and then not subtract the accrued interest in the later step?

3.The CTD which they mention is problems and give a conversion factor to calculate the futures settlement price..... How do they already know the CTD ? Is that just an assumption to make up the problem?

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