To create yield QFormulas

You can calculate the yield of a futures contract based on the treasury delivered against it. The calculation uses the invoice price, which is the conversion factor multiplied by the futures price.

You create a QFormula and then set the treasury and the calculation parameters. Apply the QFormula as you would any QFormula: on a chart, on a trading application, or on a quote application.

For example, if you know the cheapest-to-deliver (CTD), then you can use that treasury’s maturity and coupon to calculate the futures contract yield. CME posts cheapest-to-deliver on their website under their Invoice Spread Calculator for each future tenor, so you don’t have to calculate it yourself. Using custom mode, set the coupon rate and maturity date using the Contract data in the CME table.

1. On Formula Builder, click the QFormulas tab.

2. Click the New button.

3. Type a name for the QFormula.

4. Click OK.

5. Type Yield( and the system displays the yield formula and an example to assist you. Replace the @ in Yield(@) with a symbol. Alternatively, you can enter the symbol, and then apply the Yield function.

6. Click the Setup button.

7. Choose one of four modes:

Default = Calculates yield based on futures standard contract maturity and coupon. For example, TYA coupon is 6% and a 10-year maturity from today. In addition, you can use a cash treasury issue such as Yield(BTC10) for a QFormula for a tradable spread, such as SPREAD(Yield(TYA)-Yield(BTC10), L1, 0.001, 10:1,, 1). Selecting Default for Yield(BTC10) uses the maturity, coupon, and price for the benchmark 10-year treasury.

Specific Issue (only with futures) = Calculates yield of the futures contract based on the entered treasury maturity, coupon, and invoice price (futures price * conversion factor for that cash treasury).

Custom = Calculates yield based on a treasury.

Eris = Calculates Eris futures contracts using Par Rate Equivalent. The handling of Eris contracts is described after this table.

8. Choose calculation parameters for a specific or custom issue:

Specific Issue = Type a treasury symbol (e.g. B033P1119) or its alias. The convention, maturity, coupon rate, coupon frequency, and day count are provided automatically.

Custom = Convention, maturity, coupon rate, coupon frequency, day count, and settlement are editable. This mode allows you to use a non-standard settlement date, such as delivery date, in the calculation.

Complex yield formulas

You can also create a complex yield formula using QFormulas.

Format: Yield(CF*Contract+GB)

where CF(conversion factor) and GB(gross basis) are constants.

For example:

Yield(2*TYA-5)

SPREAD(Yield(TYA)-Yield(USA))

SPREAD(Yield(2*TYA-5)-Yield(3*USA+3))

AGGR(100*Yield(CUS10)&100*Yield(BTC10))

Each formula within the complex formulas can contain one symbol only. This symbol is used to generate the default yield specification.

If a complex formula is used as the input of a yield function, the system uses the conversion factor that you enter. The system does not automatically associate symbol-related-yield-spec-conversion factor with it. For example:

Yield(TYA) = system calculates conversion factor from TYA’s yield specification.

Yield(2*TYA-1) = system uses 2, the value you entered

Set yield parameters on the Setup window.

If a complex formula is used as the input of a Yield function, then only the default and custom modes can be used with it.

Formulas that require any type of historical data in their calculations and that are used in synthetic strategies can use only raw contracts. For example, this formula would not be allowed: SPREAD(YIELD(C*TYA+G)-YIELD(TUA)).

These complex yield formulas can be used with QuoteBoard, Custom QuoteBoard, EQSS, Market Watch, QSS, charts, alerts, Auto Trade, and monitors. You can trade Yield, Spread Yield, and Aggr Yield formulas on all trading applications and QSS, EQSS, and Monitors. You cannot use these formulas with Spread Matrix and Spread Pyramid.

Eris contracts and Par Rate Equivalent yield

A Par Rate Equivalent yield model is available for Eris Futures contracts.

The model is calculated like this:

Par Rate Equivalent = NPV / PV01 / 10,000 + Contract Fixed Rate

where PV01 = ABS(FixedNPV / Coupon) * 10.0

Eris publishes the default PV01 value daily in their EOD settlement file. They provide this link to access the file: ftp://ftp.erisfutures.com/.

You can also use your own PV01 value.

The model can be applied to Yield charts and the Yield function in Formula Builder.

For more information about par rate equivalents, consult “ISV Guide for Calculating and Displaying Par Rate Equivalents” (May 2015) by Eris Exchange.

Calculating Mixed Eris and Non-Eris Strategies