Financial Risk Manager Part 1
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The yield curve is upward sloping. You have a short T-bond futures position. The following bonds are eligible for delivery:
| Bond | A | B | C |
|---|---|---|---|
| Spot price | 102-14/32 | 106-19/32 | 98-12/32 |
| Coupon | 4% | 5% | 3% |
| Conversion factor | 0.98 | 1.03 | 0.952 |
The futures price is 103-17/32 and the maturity date of the contract is September 1. The bonds pay their coupon semiannually on June 30 and December 31. The cheapest to deliver bond is: