Because different bonds have different coupon rate and maturity, when they are converted into virtual standard bonds with a coupon rate of 3% and a maturity of 5 years, they need to be converted according to a certain proportion, which is called the conversion coefficient. In descriptive terms, the calculation rule of the conversion coefficient is to discount all future cash flows of bonds into the present value of treasury bonds futures delivery date, with a discount rate of 3%. The specific calculation formula is as follows:

The meaning of each item in the above formula is:

CF is the conversion coefficient;

R is the standard coupon rate of treasury bond futures contracts;

C is the deliverable national debt coupon rate expressed at the annual interest rate;

N is the remaining term of the deliverable national debt before the maturity date;

D is the actual number of days between the third delivery date of the contract and the first interest payment date of the subsequent deliverable national debt;

Y is the actual interval between two interest payments of deliverable national debt.

Investors don't need to delve into the calculation details of the conversion factor, just need to understand the concept it represents. The conversion factor will be announced by the exchange when the contract is listed, and its value will remain unchanged during the contract period. Table 1-3 is the conversion coefficient of three treasury bond futures contracts of CICC.

Table 12-year treasury bond futures contract conversion coefficient

Table 25-year Treasury bond futures contract conversion coefficient

Table 3 10-year Treasury bond futures contract conversion coefficient

Through theoretical analysis, referring to Table 1 to Table 3, it can also be seen that more than 3% of bonds in coupon rate have a conversion coefficient greater than 1, and less than 3% of bonds in coupon rate have a conversion coefficient less than 1. This is because the present value of bonds in coupon rate greater than 3% is greater than 1 after being discounted at the interest rate of 3%, and vice versa.

Through the conversion coefficient, the invoice price of treasury bond futures delivery can be determined, and the specific formula is:

Invoice price = settlement price × conversion factor+accrued interest