My boss asked me to derive the duration of a Treasury Bond Futures contract. He says it’s not a difficult problem, but I can’t seem to figure out how to tackle it. The solution should be related to the Conversion Factor of the Cheapest-to-Deliver bond. I’ve searched and found some very complex papers which attempt to price a Treas-Bond Futures, but since neither my boss nor I have a PhD, I’m sure that this is not what he expects. If there is not a closed-form solution for the duration of T-bond futures, does anybody know what approach I should use to arrive at an empirical solution? Thanks in advance for anyone who can shed some light.
This should help you: http://www.cmegroup.com/trading/interest-rates/duration.html
Great, thank you so much, HighYielder! I didn’t know that such a calculator (Treasury Futures Empirical Duration Tool) was available online. That is exactly what I need. However, I have to build something like this in-house. Do you think the CME (in particular, David Boberski, the author of the tool and the corresponding research piece) will entertain questions about how they build this empirical duration calculator for Treasury Futures? Is it easy, and has anybody done something like this before?