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"Safeguard your interest in the future

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NSE An Overview......03

Interest Rate Futures A Global Perspective04

New prospects with Interest Rate Futures.....05

Interest Rate Futures : Key Concepts 07

Interest Rate Futures at NSE .12

Product Specifications13

Uses of IRF for Market Participants...16

Key Benefits of Interest Rate Futures18

Case Studies....20

Contact Us......24

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National Stock Exchange An Overview

National Stock Exchange of India Limited (NSE) is an electronic exchange with a nationwide
presence. It offers trading facility through its fully automated, screen based trading system. A variety
of financial instruments, which includes, equities, debentures, government securities, index futures,
index options, stock futures, stock options, currency futures, Interest Rate Futures etc. are traded on
its electronic platform. NSE is the largest stock exchange in India, with a significant market share in
equities ,and in derivatives equities/equity indices/currency. It is also one of the leading global
exchanges. NSE uses a state of the art telecommunication network to provide investors an efficient
and transparent market.
NSE has created new benchmarks in technology infrastructure, risk management systems, clearing
and settlement systems, investor services and best market practices. It has been in the fore front
offering newer products in equities and derivatives and also new asset classes for the investors to
choose from.

Milestones / Achievements
Over the years NSE has achieved a series of milestones and landmarks, which have had a significant
impact on the securities trading environment in the country.
November 1992 Incorporation
April 1993 Recognition as a stock exchange
November 1994 Capital Market Segment goes live
April 1995 Establishment of NSCCL, the first Clearing Corporation
October 1995 Became the largest stock exchange in the country
April 1996 Launch of S&P CNX Nifty
June 1996 Establishment of Settlement Guarantee Fund
December 1996 Commencement of trading/settlement in dematerialised securities
February 2000 Commencement of Internet Based Trading
June 2000 Commencement of Derivatives Trading (Index Futures)
June 2001 Commencement of trading in Index Options
July 2001 Commencement of trading in Options on Individual Securities
November 2001 Commencement of trading in Futures on Individual Securities
November 2006 NSE awarded 'Derivative Exchange of the Year', by Asia Risk magazine
March 2008 Launch of long term option contracts on S&P CNX Nifty
April 2008 Launch of Securities Lending & Borrowing Scheme
April 2008 Launch of India VIX The Volatility Index
June 2008 Setting up of Power Exchange India Ltd
August 2008 First exchange in India to launch Currency Futures contracts
August 2009 Launch of Interest Rate Futures
November 2009 Launch of Mutual Fund Service System
December 2009 Commencement of settlement of Corporate Bonds
February 2010 Launch of Currency Futures on Additional Currency

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Interest Rate Futures A Global Perspective

Interest Rate Futures contracts were first traded in the United States on October 29, 1975 in response
to a growing need for tools that could protect against sharp movements in interest rates. Since then,
Interest Rate Futures have become a fundamental risk management tool for financial markets
Interest Rate Futures are the most widely traded derivatives instrument in the world. The total
outstanding notional principal amount in Interest Rate Futures is 25.48 times higher than equity
index futures.

Source: BIS

The total turnover in the year 2008 for Interest Rate Futures was around USD 14,00,000 billion,
which is around 10.5 times higher than equity index futures. The table given below shows the
enormous contribution made by Interest Rate Futures in the global derivatives markets:
Turnover USD in Billion
Regions / Markets Interest Rates
North America 774439.10
Europe 543902.30
Asia & Pacific 63811.50
Other Markets 10645.50
TOTAL 1392798.40
Source: BIS

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Interest Rate Futures in India New Prospects

With the commencement of Interest Rate Futures trading under a new framework, the Indian
financial markets would achieve another milestone.
Interest rates are linked to a variety of economic conditions. They can change rapidly, influencing
investments and debt obligations. In a market environment where long term debt issuance by the
government is increasing and the demand for it is growing, there is a strong need for a cost efficient
hedging instrument against interest rate risk.

The last five years government borrowings are indicated in the graph below.

Source: RBI

Market participants hold large amounts of GOI Securities which are impacted in value due to interest
rate fluctuations.
Over the last decade, the movement in the 10 year Benchmark Government of India (GOI)
securities yield has shown significant movement, ranging from 5% to 12%.

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10 Year Benchmark Government of India security Yield rate

Source Reuters - INBMK

Interest rate risk is the uncertainty in the movement of the interest rates. Interest rates have never
been constant in the past and one can easily presume they would not remain constant in the future.
The volatility of interest rates has increased manifold in the last couple of years. The annualized
volatility of yield of 10 year benchmark GOI security for the calendar year 2008 has been 17.40%
compared to 8.51 % in 2007. Such volatility increases risk and requires tools to manage risks.
Interest Rate Futures are the product for managing the interest rate risk.

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Interest Rate Futures Key Concepts

Interest Rate
Interest rate is the amount charged, expressed as a percentage of principal, by a lender to a borrower
for the use of assets. They are typically noted on an annual basis, known as the annual percentage
rate (APR). E.g. 6.05 Feb 2019 security bears an interest rate of 6.05% annually which is also
referred as coupon.
Does the rate of return remain same throughout the tenure of the bond? No, to measure the rate of
return on your investment lets understand the concept of yield.
Yield is the income (return) on an investment. This refers to the income received from a security and
is usually expressed as a percentage (annual return) based on the investment's cost, its current market
value or its face value. Yield and price of a bond have an inverse relationship. As yield increases, the
price of the bond decreases and vice-versa.
Always an avid investor would be interested to know the period it takes to recover his initial
investment in the bond. The concept of duration shall explain this.
The term duration has a special meaning in the context of bonds. It is a measurement of how long, in
years, it takes for an investment in a bond to be repaid by its internal cash flows. It is an important
measure because bonds with higher durations carry more risk and have higher price volatility than
bonds with lower durations.
Duration is expressed as the number of years (measured as a weighted average) in which the bond
will pay out. Basically, duration is a weighted average of the maturity of all the income streams from
a bond or portfolio of bonds. So, for a two-year bond with 4 coupon payments every six months of
Rs. 50 and a Rs. 1000 face value, duration (in years) is 0.5(50/1200) + 1(50/1200)+ 1.5(50/1200)+
2(50/1200) + 2(1000/1200) = 1.875 years.

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Modified duration is a measure of the sensitivity of the price (the value of principal) of a fixed-
income investment to a change in interest rates. Rising interest rates mean falling bond prices, while
declining interest rates mean rising bond prices. The greater the duration number, the greater the
interest-rate risk or reward for the bond.
Modified duration does not factor the bigger change in the yield and represents linear relationship.
However to measure the curvature in the relationship between bond price and yield, a concept called
convexity is used.
Convexity is the measure of the curvature in the relationship between bond prices and bond yields
that demonstrates how the duration of a bond changes as the interest rate changes. It is used as a risk-
management tool, and helps to measure and manage the amount of market risk to which a portfolio
of bonds is exposed.

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Price Yield Relationship


Change in the price is in response to change in yield which can be measured using duration and

Types of Yield Curve

A yield curve visually depicts the term structure of interest rates for debt instruments of the same
quality (rating).

Positive Yield Curve

A Yield Curve in which long-term rates are
higher than short-term rates. The yield
curve has an upward slope, meaning longer
maturities earn a higher rate of interest. It
is also known as a normal yield.
In a positive yield curve environment,
prices of corresponding financial futures
contracts decrease the more the delivery
date is deferred.

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Negative Yield Curve

Flat Yield Curve

Interest Rate Futures

An Interest Rate Futures contract is "an agreement to buy or sell a debt instrument at a specified
future date at a price that is fixed today."
Exchange traded Interest Rate Futures are standardized contracts based on a notional coupon bearing
GOI security. The contract shall be physically settled by delivering deliverable grade securities.

Yield Curve in which short-term rates are
higher than long-term rates. A negative
yield curve typically occurs during a period
of inflation, when heavy demand for credit
pushes short-term rates up in relation to
long-term rates.
Financial futures prices would then be
lower for shorter-dated maturities relative
to longer maturities.
A flat yield curve may result when there is
little or no credit premium demanded for
longer-term loans and investments. A flat
curve may be slightly positive, slightly
negative, or even slightly humped.

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Accrued interest
Accrued interest is the interest amount accrued from last coupon payment date up to the day prior to
the settlement date. It is calculated using 30/360 day count convention which assumes each month
has a period of 30 days.

Invoice Price
It will be the price paid by the Long position holder of contract to short position holder on settlement
of contract. Invoice price = (Futures Settlement price * Conversion factor of the delivered bond) +
Accrued Interest.

Conversion Factor
The conversion factor equates the deliverable security (per rupee of principal), to yield 7% with
semiannual compounding.

Cheapest to Deliver Bond (CTD)
Bond which can be bought at cheapest price from underlying bond market and delivered against
expiring futures contract is called CTD bond. It will be a bond where difference between Quoted
price of Bond (Futures Settlement Price * Conversion Factor) is the most beneficial to seller.

Price #
Price of
Bond (A)#
7.46- 2017 100 102.74 1.0270 102.70 0.04
6.05-2019 100 95.64 0.9360 93.60 2.04
6.35-2020 100 96.09 0.9529 95.29 0.80
7.94-2021 100 104.63 1.0734 107.34 -2.71
8.35-2022 100 107.02 1.1113 111.13 -4.11
6.30-2023 100 89.75 0.9395 93.95 -4.20
#Futures settlement price and quoted price of bonds are assumed.

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Interest Rate Futures at NSE

Robust trading systems, clearing and settlement systems and technology are the key to an efficient
and effective financial market. NSE, Indias largest stock exchange, has proven its ability to master
the challenge of providing the best systems and practices for the markets. NSEs Interest Rate
Futures offer the same reliable features as its other products.

Lets understand the advantages of NSEs Interest Rate Futures :
Standardization and Flexibility
Interest Rate Futures contract offers market participants a standardized product which they
can use conveniently for taking a view of the future direction of the market, hedging and
creating income strategies.
Price Transparency and Liquidity
Electronic trading platform of NSE ensures transparency of prices, volumes and trade data.
Trading standardized contracts results in a concentration of order flows, thus ensuring market
Leverage Effect due to a wider collateral management
Due to widened scope of collateral acceptance by NSE, participants can take advantage of
leverage by investing in futures contract. Also participants can benefit by using a single
collateral pool for both currency and Interest Rate Futures trading.
Advance trading software and technological edge
Trading on NSE takes place via NEAT plus and NOW (NEAT on Web) systems through
which large numbers of trading terminals have direct access to the market.
Centralized clearing supported by guaranteed settlement
Trades are settled through Indias only AAA rated clearing corporation, the National
Securities Clearing Corporation Limited (NSCCL), which acts as a central counterparty to all
trades and guarantees financial settlement.
Managing counterparty risk
The efficient risk management system of NSCCL eliminates the risk of counterparty default
due to novation of trades by its clearing corporation.

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Product Specifications
Particulars Description
Symbol 10YGS7
Market Type N
Instrument Type FUTIRD
Underlying 10 Year Notional Coupon-bearing Government of India (GOI) security
Notional Coupon 7% with semi-annual Compounding
Tick size 0.25 paise or INR 0.0025
Trading Hours 9:00 am to 5:00 pm (Monday to Friday)
Contract Size INR 2 lakhs
Similar to quoted price of GOI securities up to four decimals with 30/360
day count convention.
Tenor Maximum Maturity: 12 months
Contract Cycle
Four Fixed quarterly contracts for entire year ending March, June,
September & December. To start with NSE has introduced two quarterly
Daily Settlement Price
Volume Weighted average price of the contract during the time period
specified by the Exchange. If not traded in specified timings then the
theoretical price of the contract as determined by the exchange will be
the daily settlement price
Settlement Mechanism
Daily Settlement - Marked to market daily
Final Settlement - Physical settlement on delivery day in the
delivery month i.e. last working day of the month
Deliverable Grade
GOI Securities maturing at least 8 years but not more than 10.5
years from first day of the delivery month with a minimum total
outstanding of Rs 10,000 crores. The list of the deliverable grade
securities will be informed by the exchange from time to time.
Further any new security which meets the eligibility criteria as
mentioned above shall be added to the list of deliverable grade
securities. However, additions, if any, shall be made not later than
10 business days before the first business day of the delivery month
Conversion Factor
The conversion factor would equate the deliverable security (per rupee of
principal), to yield 7% with semiannual compounding.
Invoice Price Futures settlement price times conversion factor plus accrued Interest
Last Trading Day Two business day preceding the last business day of the delivery month.
Delivery Day Last business day of the delivery month.
Initial Margin
SPAN Based Margin subject to minimum 2.33% on first day and 1.6%
Extreme loss Margin 0.3% of the value of the gross open positions of the futures contracts

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Physical Settlement Mechanism
The Interest Rate Futures contracts at NSE would be physically settled by the delivery of
deliverable grade securities.
Physical delivery will be through electronic book entry system of NSDL, CDSL and
SGL/CSGL Settlement through RBI PDO
Settlement cycle: T+2 delivery with sellers intention to deliver two business days prior to
actual delivery date.
Position Limits
Position limits shall be applicable on gross open positions across all contracts.
Client Level: It should not exceed 6% of the total open interest or Rs. 300 crores whichever
is higher.
Trading Member Level: It should not exceed 15% of the total open interest or Rs. 1000
crores whichever is higher.
Clearing Member Level: No separate position limit is prescribed at the level of clearing
member. However, the clearing member shall ensure that his own trading position and the
positions of each trading member clearing through him is within the limits specified above.
FIIs: Total gross long position in the debt market and the Interest Rate Futures contract
should not exceed their individual permissible limit for investment in government of India
securities as prescribed from time to time. Short position in Interest Rate Futures contract
should not exceed long position in the government of India securities market and in Interest
Rate Futures.

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Interest Rate Futures (IRF) and Market Participants

Market Participants
Banks and Primary Dealers
Mutual Funds and Insurance Companies
Corporate houses and Financial Institutions
Member Brokers and Retail Investors

How to participate in Interest Rate Futures trading at NSE

Interest Rate Futures can be bought and sold through the trading members of the National Stock
Exchange. To open an account with a NSE trading member you will be required to complete the
formalities which include signing of member constituent agreement, constituent registration form
and a risk disclosure document. The trading member will allot you a unique client identification
number. To begin trading you will be required to deposit cash or collateral with your trading
member as may be stipulated by them.

Eligibility Criteria
The members registered by SEBI for trading in currency / equity derivatives segment shall be
eligible to trade in Interest Rate Derivatives also subject to meeting following criteria
o Net worth of Rs. 1 crore for Trading members
o Net worth of Rs. 10 crores for Clearing members

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Uses of IRF for Market Participants

Banks and Interest Rate Futures
Managing duration gap with respect to change in interest rates.
Protecting against the devaluation of G-sec in AFS and HFT portfolios.
Hedging against re-pricing risk related to volatility of cash flows due to revaluation of assets
and liabilities over a period of time.
Mitigating Basis risk when yield on assets and costs on liabilities are based on different
Primary Dealers and Interest Rate Futures
Underwriting of primary issues is carried out by the primary dealers, who also enable market
making for government securities. Interest Rate Futures can be used to minimize the risk due
to volatility of interest rate when primary dealers are exposed to meeting their underwriting
With increasing government borrowings, the pressure on primary dealers to adhere to
obligations is enormous. IRF will help to minimize the securities portfolio risk.
Mutual Funds, Insurance Companies and Interest Rate Futures
It can mitigate interest rate risk arising out of huge exposure to government securities and
corporate debt.
Optimizing the portfolio returns.
IRF can provide another avenue to mutual funds for improving investment income by
arbitrage between cash and futures markets of the debt segment, as well as through spread
trading strategies.
Maximizing the return on investments of insurance companies in interest bearing securities,
thereby minimizing the actuarial risk for the insurance company.

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Corporate Houses and Interest Rate Futures
Companies can reduce their borrowing cost by using IRF to manage companys exposure to
interest rate movement.
By using IRF to manage interest rate risk companies can optimize the cost of capital to
company leading to optimal debt-equity ratio.
Improve the credit rating for a corporate by enhancing the debt-service coverage ratio and the
interest coverage ratio by better risk management using IRF.
Corporate can convert their fixed rate borrowing to floating if view is of a falling yield.

FIIs and Interest Rate Futures
Hedging against underlying GOI securities portfolio.
FIIs having a view on long term interest rate could benefit by participating in new asset class.

Member brokers, Retail investors and Interest Rate Futures

Brokers can use IRF for generating income by arbitrage between cash and futures market of
the debt segment.
With increased market participation in Interest Rate Futures member brokers can earn
additional income in the form of brokerage fee charged to clients.
Portfolio management services to retail and corporate clients who are already trading in
equity and currency can be extended with introduction of IRF.
Small lot size provides retail investors to hedge their interest rate payment on home loans to
protect against rising interest rates.

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Key Benefits of Interest Rate Futures

Directional trading
As there is an inverse relationship between interest rate movement and underlying bond
prices, the futures price also moves in tandem with the underlying bond prices.
If one has a strong view that interest rates will rise in the near future and wants to benefit
from rise in interest rates; one can do so by taking short position in IRF contracts on NSE and
benefit from the falling futures prices.
Detailed example is explained in case study 1.
Hedge your Portfolio
Holders of the GOI securities are exposed to the risk of rising interest rates which in turn
results in the reduction in the value of their portfolio. So in order to protect against a fall in
the value of their portfolio due to falling bond prices, they can take short position in IRF
contracts on NSE.
Detailed example is explained in case study 2.
Calendar Spread Trading
A Calendar Spread, also known as an Inter-delivery Spread, is the simultaneous purchase of
one delivery month of a given futures contract and the sale of another delivery month of the
same underlying on the same exchange. This type of spread is called a "calendar spread"
because it is based on different calendar months.
For instance, buying a September 09 contract and simultaneously selling a December 09
contract. A market participant can profit (or lose out) as the price difference between the two
contracts widens or narrows.
Detailed example is explained in case study 3.

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Reduce the duration of portfolio
As the bonds with longer maturities are more sensitive to interest rate changes, bond
portfolio with longer duration will be more exposed to the vulnerability of the movement in
interest rate.
A Portfolio manager who is concerned about the rise in short term interest rate risk would
like to reduce the duration of the portfolio. By entering into an IRF contract on NSE, the
portfolio manager can reduce duration of the portfolio.
The below formula denotes the approximate number of contracts which needs to be entered
into to achieve the desired duration
Approximate number of contracts


t t T
P D D ) (
Conversion Factor of CTD Bond
= Target duration of portfolio
Dt = Initial duration of portfolio
Pt = Initial market value of portfolio
= The duration of cheapest to deliver bond
= The value of cheapest to deliver Bond (Price * contract multiplier)

Arbitraging between cash and futures market
Arbitrage is the price difference between the bonds prices in underlying bond market and IRF
contract without any view about the interest rate movement.
One can earn the risk-less profit from realizing arbitrage opportunity and entering into the
IRF contract traded on NSE by initiating cash and carry trade involving the following steps:
Purchase the cheapest to deliver bond
Take short position in IRF contract
Finance the bond purchase at the current borrowing rate from the market.
Give the intention of delivery to the exchange
Deliver the bond and receive the invoice price.
Repay the cash amount borrowed to purchase the bond.

Detailed example is explained in case study 4.

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Case Studies

Case study 1: Directional trading

A trader expects a long term interest rate to rise. He decides to sell Interest Rate Futures
contracts as he shall benefit from falling future prices.

Trade Date- 5
Oct 09
Futures Delivery date 1st Dec 2009
Current Futures Price- Rs. 93.50
Futures Yield- 7.36%
Trader sell 250 contracts of the Dec 09 10 Year futures contract on NSE on 5
Oct 2009 at
Rs. 93.50
Daily MTM due to change in futures price is as tabulated below
Daily Settlement Price*
Calculation MTM (Rs)
5-Oct-09 93.6925 250*2000*(93.5000-93.6925) -96250.00
6-Oct-09 93.4625 250*2000*(93.6925-93.4625) 115000.00
7-Oct-09 93.4575 250*2000*(93.4625-93.4575) 2500.00
8-Oct-09 93.1275 250*2000*(93.4575-93.1275) 165000.00

Net MTM gain as on 8
Oct 09 is Rs. 1,86,250 (I)

* Daily Settlement price shall be the weighted average price of the trades in the last hour of

Closing out the Position
Oct 2009- Futures market Price Rs. 93.1125
Trader buys 250 contracts of Dec 09 at Rs. 93.1125 and squares off his position
Therefore total profit for trader 250*2000*(93.1275-93.1125) is Rs.7,500 (II)
Total Profit on the trade = INR 1,93,750 (I & II)

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Case Study 2: Hedging
A bank has a large portfolio of GOI securities worth Rs. 25 crores. Banks portfolio consists of
bonds with different coupons and different maturities.
In view of rising interest rates in the near term, the treasury head is concerned about the negative
effect this will have on the banks portfolio. The treasury head wants to hold his entire portfolio and
at the same time doesnt want to suffer losses on account of fall in bond prices.
Should the bank go short or long on the futures contracts to establish the correct hedge?
The treasury head decides to hedge the interest rate risk by taking a short position in the Interest Rate
Futures on NSE.
Example :
Date: 05-Oct-2009
Spot price of GOI Security: Rs 98.0575
Futures price of IRF Contract: Rs 93.7925

On 05-Oct-2009 XYZ bought 2000 GOI securities from spot market at Rs 98.0575. He anticipates
that the interest rate will rise in near future. Therefore to hedge the exposure in underlying market he
may sell Dec 09 Interest Rate Futures contracts at Rs 93.7925

On 16-Nov-2009 due to increase in interest rate:
Spot price of GOI Security: Rs 97.2500
Futures Price of IRF Contract: Rs 93.1500

Loss in underlying market will be (97.2500 - 98.0575)*2000 = Rs 1615
Profit in the Futures market will be (93.7925 93.1500)*2000 = Rs 1285

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Case Study 3: Calendar Spread Trading
A long & short position in different futures contracts on the same underlying is called as a calendar
If a Long position in a Dec 09 IRF contract versus a Short position in the Mar 10 IRF contract on
NSE is considered a calendar spread.
Since a calendar spread entails only the basis risk, the bank runs little risk on the positions.
Trade Date : 5
Oct 09
Dec 09 Futures (Rs.) : 93.3600 93.3800
Mar 10 Futures (Rs.) : 91.9700 92.0200
The difference between the Dec 09 & Mar 10 contracts is currently Rs. 1.41 (after considering bid-
ask). If the trader believes that this spread is very high, he would execute a calendar spread by
Selling the Mar 10 futures at 91.9700
Buying the Dec 09 futures at 93.3800
10 days later
Trade Date : 15
Oct 09
Dec 09 Futures (Rs.) : 93.0050 93.0250
Mar 10 Futures (Rs.) : 91.3000 91.3700
The difference between the Dec 09 & Mar 10 contracts is now Rs. 1.6350 (after considering bid-
The trader may decide to liquidate his calendar spread trade by
Buying the Mar 10 futures at 91.3700 (Profit 0.60)
Selling the Dec 09 futures at 93.0050 (Loss 0.38)
Net profit of Rs. 0.22 without running any interest rate risk

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Case Study 4: Arbitrage
The price differential in the underlying bond market and the future market can also provide
opportunities to arbitragers. If the futures are expensive compared to the underlying,, then the
arbitrager can make profit by taking long position in underlying market by borrowing funds and
taking short positions in the future market. This is explained with following example.

On 15
Oct, 09 buy 6.35% GOI 20 at the current market price of Rs. 97.2550 and conversion factor
is 0.9815
Step 1 - Short the Dec 09 futures at the current price of Rs. 100.00 (7.00% Yield)
Step 2 - Fund the bond by borrowing up to the delivery period (assuming borrowing rate is 4.25%)
Step 3 - On 1st Dec 09, give a notice of delivery to the exchange
Assuming the futures settlement price of Rs. 100.00, the invoice price would be
= 100 * 0.9815
= Rs. 98.15

Under the strategy, the bank has earned a return of
= (98.1500 97.2550) / 97.2550 * 365 / 49
= 6.86 % (implied repo rate)
(Note: For simplicity accrued interest is not considered for calculation)
Against its funding cost of 4.25% (borrowing rate), thereby earning risk free arbitrage
The bond with the highest implied repo rate would be the cheapest to deliver (CTD) bond.
The arbitrager would identify the bond with the highest implied repo rate or the CTD bond and
execute the strategy with the same bond, depending on its availability in the secondary market.

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Contact Us

Exchange Plaza, Bandra Kurla Complex, Bandra (E),
Mumbai 400051, India
Tel: + 91 22 26598100/ 66418100
Fax: + 91 22 26598120
Web Site:


Market Conditions can lead to substantial profit or loss. Investors are advised to seek adequate product and
market knowledge as well as proper investment advice before trading. The material provided here is for
general information purposes only. While care has been taken to ensure accuracy, the information furnished to
reader with no warranty as to accuracy or completeness of its contents and on condition that any changes,
omissions or errors shall not be made the basis for any claim, demand or cause of action.