Futures contract equivalency

• Serves two key purposes. First, it converts the hedgeable positions into standardized units. Secondly, it allows these standardized units to be used as building blocks. When used as building blocks, option characteristics can be more clearly established. For example, an initial equivalency for treasury notes and bonds is the conversion factor. It relates various coupons and maturities into economically deliverable, not necessarily perfectly priced, units.

 Embedded terms in definition
 Conversion factor
Treasury note
 Related Terms

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