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caperover
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Posts: 49
Joined: June 25th, 2005, 4:54 pm

DV01 of Treasury Futures

August 2nd, 2022, 3:41 pm

Treasury Futures are often used to hedge interest rate risks. Given CtD, a Treasury Futures contract's DV01 is approximately
      DV01 of Treasury Futures = DV01 of CtD x Conversion Factor
and thus
    Duration of Treasury Futures = Duration of CtD
However, when I estimate the duration by the ratio between daily Treasury Futures log return and CtD yield change, it can be quite different from the duration of CtD and fluctuate by quite a lot as well. Although I understand there is embedded delivery  option, I don't feel that is large enough to explain the difference, in particular if the CtD security does not change.  Does anyone know the main driver of the difference?  Thanks in advance!
 
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caperover
Topic Author
Posts: 49
Joined: June 25th, 2005, 4:54 pm

Re: DV01 of Treasury Futures

August 3rd, 2022, 5:31 pm

Never mind. I found  the answer.
 
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DavidJN
Posts: 242
Joined: July 14th, 2002, 3:00 am

Re: DV01 of Treasury Futures

September 18th, 2022, 7:47 pm

It would be considered good form to share your insight. May we assume your resolution has to do with the embedded CtD option?