Basis Net Of Carry

Discussion in 'Index Futures' started by muppet_trader, Mar 11, 2006.

  1. Hey Folks,

    Not sure if this is the right place for this but anyway here goes.

    When finding the cheapest to deliver (CTD) bond for a bond future the best way is to use the implied repo rate. So the bond with the highest implied repo rate is the cheapest to deliver.

    Another quick and dirty way to find the CTD is to use the Basis Net of Carry.

    Supposedly the problem with this method is that it doesn't take into account the the actual market price of the bond.

    I don't quite get this.

    The way I see it is that the basis does include the market price of the bond. Is the problem with th Basis Net of Carry that it does not look the Invoice Price of the bond relative to purchase price of the bond.