Futures: Conversion Factor

CFA Level II Portfolio Management
#1

Hi can someone help to explain the concept of conversion factor in pricing of T-bond futures?

It is supposed to be used for the “cheapest to deliver” bond. What does cheapest to deliver mean in this context? Is it cheapest in turns of cash price of the various T-bonds?

And if so does this conversion factor apply to corporate bond futures as well?

#2

Our good friend S2000magician answered this question nicely a couple of years ago. http://www.analystforum.com/forums/cfa-forums/cfa-level-i-forum/91330426

As far as I know there are no futures contracts on corporate bonds.

#3

That’s perfect thanks JayWill for directing me there