// definition
Cheapest-to-deliver
Economically cheapest deliverable bond (CTD)
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Short definition
The eligible bond whose delivery is economically most advantageous to the seller of a bond futures contract. The choice depends on the bond price, conversion factor and funding through delivery. The selected bond can change with market conditions; its cash price alone does not identify it.
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Intuition
The seller compares acquisition and carrying costs with delivery proceeds calculated using the conversion factor.