> OMG, you made me read his article, and only then realized how ludicrous the "cheapest-to-deliver option" is.
It’s not really ludicrous, the US Treasury isn’t selling bonds of every duration every single day. You need some kind of framework to outline which Treasuries are acceptable to settle derivative contracts like futures/options/CDSes since Treasuries are not directly fungible like equity shares or commodities.
It’s not really ludicrous, the US Treasury isn’t selling bonds of every duration every single day. You need some kind of framework to outline which Treasuries are acceptable to settle derivative contracts like futures/options/CDSes since Treasuries are not directly fungible like equity shares or commodities.