reference (hypothetic) bond in treasure futures

[zly]

Does any one know the specification of the underlying reference bond (hypothetic bond) under the treasure futures for pricing purpose? say, for 10 - year note futures, is the underlying bond for the futures a 10 -year bond with 6% coupon rate or 8.5 - year bond with 6% annual coupon rate? What doe people use to price the futures?


Note that I am asking this question for pricing perspective, not for settlement or delivery practice in which short position is entitled to deliver a broad set of qualified products.

many thanks

 

[Sarang]

The most natural reason would be to use it as a discounting factor for getting 'today's worth' of the future value.

 

[Ken Abbott]

futures

I believe that it's to establish a pricing basis independent of coupon. Coupon introduces a potential tax impact. There's been a lot written about this, most of it in the 1980's. Contact me if you're interested.