Hey guys, I was cruising through all the lessons thus far, when all of a sudden I came upon T-Bill futures pricing, and got totally stuck. In Schweser and the CFA Curriculum, all of a sudden the material seems to become totally obtuse and is pulling out formulas that to me make no sense. Does anyone have a common-sense way to explain this?!?! (pg 44 of Schweser and starting around page 100 of the CFA Curriculum.) Much Thanks.
Can you post the problem here… I can try and help you out, if I remember…Do not have access to my Derivatives book here, right now. CP
60 day T-bill quoted at 6% 150 day T-bill quoted at 6.5% Calculate the no-arbitrage price of a 90-day future… I’m afraid I just don’t understand the CONCEPT of the whole thing. Was this anywhere in level 1?
deannualize the rates 60 days @ 6% = 60/360*.06=.01 150 days @ 6.5% = 150/360* .065= .0271 90 day rate = (1.0271/1.01 -1)= .01693 annualized it = .01693*360/90= .0677
Forward rates from spot rates was a topic in level I. In a nutshell: given no-arbitrage pricing, an investor is indifferent between investing money for 150 days @ 6.5% or 60 days @ 6% then 90 days @ X%. Turning that into a formula and rearranging yields the equation in epoh’s answer. Hopefully that jogs your memory, otherwise pull out the L1 books 
yeah, I might have to 
Pgs 100+ in the CFAI are clearly marked “Optional”…