Here's an easy one.....for you?

[brian.field]

I am annoyed that I cannot follow the Treasury Bond quotes on Hull's page 133.

Hull states that 124.150 is equal to 124 and 15.0/32. I get this.

He later states that 120-105 is equal to 120 and 10.5/32. I get this too.

Now, Hull then states that 117-157 is equal to 117 and 15.75/32. How does he arrive at 15.75? I assume this should be 117 and 15.7/32.

Am I missing some rule that is obvious? i.e. do we round to nearest .05?

Thank you!

Brian

 

[David Harper CFA FRM]

@brianhfield I bet you are so good at your job: that is rare attention to detail. I admit I've scanned that paragraph dozens of times without noticing that. I first checked Hull's errata but it wasn't there. Then his new 9th edition (not assigned to FRM, it just came out) and sure enough he elaborates (emphasis mine, he's updated the numbers):

Quotes: Ultra T-bond futures and Treasury bond futures contracts are quoted in dollars and thirty-seconds of a dollar per $100 face value. This is similar to the way the bonds are quoted in the spot market. In Table 6.1, the settlement price of the June 2013 Treasury bond futures contract is specified as 144-20. This means 144 20/32, or 144.625. The settlement price of the 10-year Treasury note futures contract is quoted to the nearest half of a thirty-second. Thus the settlement price of 131-025 for the September 2013 contract should be interpreted as 131 25/32, or 131.078125. The 5-year and 2-year Treasury note contracts are quoted even more precisely, to the nearest quarter of a thirty-second. Thus the settlement price of 123-307 for the June 5-year Treasury note contract should be interpreted as 123 30.75/32, or 123.9609375. Similarly, the trade price of 123-122 for the September contract should be interpreted as 123 12.25/32, or 123.3828125.

And, indeed, the 2-year note contract specs also indicate rounding to the nearest quarter of a 1/32. So, under that approach, Hull's example of 108-302 looks like it would be 30.2 rounded to 30.25. Below from http://www.cmegroup.com/trading/int...us-treasury-note_contract_specifications.html

Points ($2,000) and quarters of 1/32 of a point. For example, 109-16 represents 109 16/32, 109-162 represents 109 16.25/32, 109-165 represents 109 16.5/32, and 109-167 represents 109 16.75/32. Par is on the basis of 100 points.

 

[brian.field]

David, You have a well-developed ability to offer positive reinforcement in your responses....your efforts are appreciated!

Thanks for your kind words...(maybe I'll forward this feedback to my boss! kidding...) Thanks for your response.

Brian