Cheapest to delivery problem

[jcjc0602]

Hi David,

Could you please explain a little bit about why the CTD system will favor low coupon and long maturity bond when the yield is greater than 6%? Thanks a lot!

 

[David Harper CFA FRM]

Hi jcjc0602, please see http://forum.bionicturtle.com/threads/highest-conversion-factor.5569/#post-15926
i.e., search "cheapest to deliver," this has been much discussed. Thanks!