# Eurodollar exercise

I'm trying to solve an exercise with Eurodollar and deliverable bonds. This is the text in matlab Basically there are two Bonds A and B and I need to find a few things about them. I use the formula with the yield to maturity (and notional = 1) to compute the Conversion factors at point 5a (the formula for Price of the bond with yield to maturity equal to 6%) and I find that CF_A = $$0.98$$ and CF_B = $$1.12$$.

However now I'm stuck after point a, since I don't understand how can i compute the different points:

5b. How can I get the number of deliverable bonds from the CF? Is there a formula? I tried asking the professor he just told me it depends on the CF itself...

5c. How can I compute the Implied Repo rate? What do I need ?

5d/5e. I know that we need to have a minimization problem with the notes basis in order to find the CTD, but I don't understand how I can do it in matlab.

If someone can help, even with only point 5b. it would be amazing! This is just a quick exercise the professor gave us to practice, nothing too serious!

• Eurodollar futures have no cheapest to delivery (the underlying is not a bond). I am sure the professor provided formulas for bond futures in the lecture notes. Mar 26 at 14:05
• The last lecture was on Eurodollar futures, so I assumed the homework was also on that, but I think you are right... in older notes there are no formulas for CTD or for number of bonds to be delivered, I even tried asking him and he just said that the number of bonds depends on the CF only. Do you know what he means? I couldn't find anything neither in the notes, nor the book/internet Mar 26 at 16:21

I find it hard to believe the professor never discussed any of these formulas but expects you to compute it - unless it is a Matlab course where teh professors expects you to search Mathworks a bit (e.g. for "select CTD bond") where there are plenty of resources (everything related to a BondFuture instrument object: like convfactor, bndfutprice, and bndfutimprepo).

For example, the implied repo rate is the return you get from selling the future and buying the CTD bond. The formula:

$$IR = \frac{DP + ACC_D - (P + ACC_S) + C}{(P_{B_{flat}} + ACC_S )\times (D_1/360)) - C \times (D_2/360)}$$

where $$DP$$ is the delivery price (factor * futures quote for factor contracts), $$ACC_S$$ is the accrued at spot date, $$ACC_D$$ is the accrued at the delivery date, $$P$$ is the flat bond purchase price, $$D_1$$ refers to the days from purchase settlement to futures delivery and $$D_2$$ are the days from interim coupon receipt to futures delivery.

If you have access to Bloomberg (via a university lab or library for example), you can look up CTD: The implied repo of -31.925 is computed as such (using Julia:

p_flat = 98.3828125
acc_s = 1.2230663
D1 = 64
interim_coupon = 1.375 # from CSHF in BBG
D2 = 44
P_delivery = 119.59375
factor = 0.7718
acc_d = 0.32880435 # from YAS for delivery date
(P_delivery*factor + acc_d-(p_flat + acc_s) + interim_coupon)/(((p_flat + acc_s)*(D1/360))-(interim_coupon*(D2/360)))*100 